Friday, 15 November 2013

The Short Version of the "Austrian" True Money Supply (TMS), as of 4 November 2013

The short version of the Austrian True Money Supply (SVTMS) for the U.S. increased by 0.93% (61.50% annualised) during the most recent week ending 4 November to reach USD 9.7540 trillion calculated based on monetary statistics just released by FRED

The 1-year growth rate for the money supply fell sharply this week, from 8.50% last week to 7.62%, to record the lowest year on year growth rate since 1 December 2008. The current growth rate is now 3.51 percentage points lower than it was at this time last year and now even lower than the long term average of 8.32% (based on data since 3 November 1980). 

All the various growth rates, except the 5- and the 20-year, are now lower than they were one year ago.

I explained last week that with bank credit growth slowing down significantly, especially since May, increased pressure is put on the government with the help of the Fed to drive money supply growth. If that continues to be the case in the next few months, you should not be surprised if the first thing Janet Yellen does when she becomes the next Fed chairman in January 2014 is to increase the Fed's monthly asset purchases. With her inflationary line of thinking and a focus on the shorter term and maintaining interest rates artificially low, she would be left with no other choice as a decline in the growth rate of money supply would lead to a bond and equity market correction (and much more). And the Fed and Yellen certainly don't want that to happen.