Friday, 8 November 2013

The Short Version of the "Austrian" True Money Supply (TMS), as of 28 October 2013

The short version of the Austrian True Money Supply (SVTMS) for the U.S. fell by 0.71% (-31.03% annualised) during the most recent week ending 28 October to reach USD 9.6658 trillion calculated based on monetary statistics just released by FRED

As a result, the 1 year growth rate fell from the 9.49% increase reported last week to 8.51% this week, the lowest growth rate for three weeks. The current 1 year growth rate is 1.02 percentage point lower than it was at this time last year. 

As I touched upon last week, if the jump in the 1 year growth rate last week was driven by a one-off spike in borrowing to catch up with the reduction in borrowing prior to the debt ceiling dead line money supply could drop next week as well. Even so, assuming bank lending growth continues to fall, the government need to borrow even more and the Fed to further increase its asset purchases (as the marginal buyer of treasuries) to avoid a fall in the money supply. Such a fall, depending on how much, would certainly lead to an economic correction and a drop in stock market prices.

You can access prior week reports here.