Friday, 6 June 2014

The Short Version of the "Austrian" True Money Supply (TMS), as of 26 May 2014

The short version of the Austrian True Money Supply (SVTMS) for the U.S. decreased by 0.27% (13.08% annualised) during the most recent week ending 26 May 2014 to hit $10.0350 trillion. Since hitting $10.1785 trillion on 14 April this year, the money supply has since declined 1.41%. The money supply is calculated from the latest data published by the Federal Reserve. 

Looking at growth rates, the 1-year growth in the money supply increased to 8.16%, up slightly from the 8.12% reported last week. The current growth rate remains lower than the 8.30% average since 1980 and continues to decline compared to the same period last year.

Smoothing the 1-year growth rate over a 52 week period shows that the trend in the money supply growth rate continues heading downwards. This current 8.16% smoothed growth rate is the lowest reported for almost five years (since 15 June 2009) and is 31 basis points lower than the 8.47% average since 1980.

The 5-year annualised growth rate in the money supply also continues to decline and at 10.51% was the lowest since 25 June 2012. Compared to the growth one year ago, the 5-year growth rate has now declined for 26 consecutive weeks. The growth rate remains however significantly higher than the 7.51% average since 1980.

As has basically been the case since I first started publishing these weekly reports back in August last year, the overall growth rate in the money supply continues to slide. Looking at the table and chart below, most of the growth rates remain lower than they were one year ago. 

Meanwhile, the U.S. stock market continues to climb. This is not a healthy development. Nor is it a sustainable one. As the Fed continues to taper, it remains to be seen whether increases in Bank Credit will "save the day" and push the growth rate in the money supply upwards once again. If the growth rate continues to slide, a stock market and economic collapse will once again hit the U.S.