Friday, 7 February 2014

The Short Version of the "Austrian" True Money Supply (TMS), as of 27 January 2014

The short version of the Austrian True Money Supply (SVTMS) for the U.S. decreased by 0.66% (28.95% annualised) during the most recent week ending 27 January to reach US$ 9.7970 trillion calculated from the most recent monetary statistics published by the Federal Reserve. 

Click here to access weekly reports since August 2013 and here to view the recap of 2013. 

The 1-year growth rate increased for the fourth consecutive week to end on 7.93%, a slight increase from the 7.85% reported last week. Compared to the same week last year, the current growth rate is however 2.47 percentage points lower, so the trend in the growth rate is continuing heading downward.

The 5-year growth rate came in at 11.22%, 43 basis points lower than a year ago. This was the ninth consecutive week with a growth rate that was lower than one year ago.

As of yesterday, the S&P 500 stock market index is down 4.05% this year. Likely contributors to this significant drop is the slowing money supply growth I've been reporting for some time in this post (click here to access the archive) and other regular posts and the US stock market reaching bubble levels. Such a mix is never sustainable and eventually something, which is always hard to predict, will trigger a stock market decline. But the lesson to take home is that it is not necessary to be able to predict the trigger: a stock market surge driven by the Fed printing money and keeping interest rates artificially low will eventually deflate when the stock market is highly valued and money supply growth tails off. 

In summary, the overall money supply growth rate is still in decline. As the table below shows (ignoring the shorter term growth rates), all the various growth rates except for the 7- and the 20-year are lower than they were a year ago.

Related: What Do All Panic-Prone Emerging Markets Have In Common?