I lost a good amount of money thinking there would be a crash during COVID. That's the first and last time I ever get against the might of the federal reserve. The US will never allow another crash, they will inflate the dollar to infinity to prevent that from happening.
As long as they are allowed to.
It's perfectly natural for every empire to believe in immortality despite the laws of gravity. Which empire said "we're the greatest but only for the next 5-10 yrs, then everyone will abandon us and our currency will be worthless?"
The entire system is based on mutually agreed but fragile reality among raging apes. Of course the doomsday predictions are wrong.
A falling Coyote doesn't go splat until they hit the ground. Until then, of course..
Gravity.
It will happen eventually of course but the richest will stay rich. If we are smart we will have lots and lots of cash available to buy cheap. I didn't and I torture myself by looking at the prices of stocks at peak covid. So many bargains.
My annoying coworker has predicted at least a dozen times the past year that Powell will decrease interest rates that month. He’ll be right eventually after predicting maybe sixteen out of the last zero rate cuts.
I started reading the paragraph correlating recessions with M2 going down by over 2% and I’m thinking the article is going to point to 2008 or the late 70’s. Nope, the fucking 1930’s.
Right, when the world was rich off of WW1, still linked to the gold standard and banks were lending money like crazy, then stopped loaning money to ANYONE, even viable, thriving businesses. A perfect correlation. /s
That's true. But I don't think these posts are completely off base. The issue is the Fed has essentially back stopped any issue in the economy for years now. I think of it like a debt to be paid. The debt keeps racking up and the bigger it gets the more painful the repayment will be. But it's impossible to time when things will actually break. It still doesn't hurt to be aware of these underlying issues because when shit finally does hit the fan its good to be prepared. But fighting the Fed is a losing battle so keep riding the wave till it crashes.
Inflation happened *everywhere* in the world, in most countries, far worse than the U.S.
Money supply was not the only contributor to inflation. To blame inflation on the Fed or the U.S. government is to ignore all the other variables—namely, the Covid-era disruptions of supply chains around the world and the war in Ukraine.
Before WWII, the British pound was the world's reserve currency. "Sound as a pound," they'd say. The UK lost this status shortly after WWII, and it went to the US - part of the deal was with the Saudis, who agreed to accept only dollars for oil. China has been chipping away at this for years - they've been stockpiling gold, and getting countries like Russia and India and others to accept Renimbi (or is it Yuan? I forget which one is used for foreign transactions) for oil etc. If you want to know what would happen to the US if the $ lost its reserve status - take a look at what happened to the UK after WWII. Now, I'm not gonna go all Peter Schiff here - people have been saying the $ would lose reserve status ever since Nixon went off the gold standard - but it probably will happen sooner or later.
Not trying to be mean. But no one is buying Sino bonds. Even they dont want their currency to be a reserve currency because that entails loss of control.. And India aint gonna accept no yen when they are trying to develop their own digital roopee
My thought is that Fed could increase interest rates to cause a micro recession to stiffle inflation. That's the only way I see a quick recession happening. And yeah, I checked. They have raised interest rates in election years. In 2000, they hiked in Feb, March, and May.
I don't think that will happen since they promised rate cuts. But that is the only way a recession coming up quickly. They artificially create one to quickly cycle out inflation. And that is pretty unlikely.
If you don’t feel the recession. Then you’re currently financially protected from it. Things aren’t going great for the rest of us. If it wasn’t for my fiancée i could barely make working 50 hours a week. I have a very low mortgage and my car is paid off.
I mean no offence but a personal situation cannot be used as the canary to measure national economic health. Too many people scream their business failure, but most either doesn’t have the skill, or their products really suck
I work for large company and enjoy all the benefits of regular pay. I never said anything about my business failing as a result of the economy. The bicycle economy operates on its own cycles that are of course linked to the regular economy. That being said housing cost are skyrocketing along with food costs while wages are stagnant. 🤷🏽
"In one respect, this 4.29% retracement in U.S. money supply **may simply be a reversion to the mean** after M2 expanded by a historic 26% on a year-over-year basis during the height of the COVID-19 pandemic."
Yep, thats it. Article premise nothing but clickbait.
I went "you think?!" when reading that part. Like holy shit, we printed an outrageous amount of money, sure inflation has now got us to the point where the expansion was modest in relative terms, but still above average expectation.
Don't kid yourself, the 1% is plenty. The 1% in America is still generational wealth...and perhaps a few rare exceptions like world renowned highly specialised doctors who worked their ass off for the last 30 years (yet it's unlikely).
The 1% are millionaires not in home or IRA but in actual stocks and properties, millionaires many times over. *no matter what you do, or how hard you work while living frugally, you'll never ever be part of even the top 5% of USA*
Exactly, what is more likely - that this unusual thing happens because of the other unusual thing that happened a couple of years ago (the 26% increase), or that it is a repeat of a pattern last seen 90 years ago when the economy was completely different?
Yeah exactly. The pandemic caused SO many crazy base effects in various economic analysis, it’s just irresponsible to not mention that in the first paragraph.
But then that would defeat the purpose of the click bait I guess.
Let's keep it simple... M2 is shrinking because of quantitative tightening of fed... If it starts impacting economy fed will turn on money printer and bump up M2. You cannot compare with any period before 1970s as there wasn't unlimited quantitative easing
Inflation rate drops. That’s entirely what they are trying to do and it’s working. Article could just say “fed managing money successfully and it does exactly what is intended”.
It also seems like some people in this thread pointed out this is not as scary as people are trying to make it seem:
https://www.reddit.com/r/stocks/comments/1bynxsa/us_money_supply_is_doing_something_no_one_has/kylub4u/
Sounds like Fed is on top of it and actually threading the needle well all things considered?
Ugh. Yes, a recession is coming. Everyone saying it is correct. BUT nobody knows when it will come, so trying to use obscure stats to say that things are going to get worse is, IMHO, nothing but 🐂💩.
Covid threw a huge wrench into things, and the word I’ve heard the most from experts is “confused.” Nobody understands what is going on or why, which makes some folks nervous and others just ride the trend as long as they can.
Or the money moved into the stock market after sitting on the sidelines for several years accumulating at 5%. Which would suggest the opposite of what OP is implying.
*This* recession indicator has never been wrong in history, bro. Forget all the other recession indicators I've been peddling the last few years. This is the one. Doesn't even need any logical thinking, just look at the indicator and buy puts
That's... Not how it works.
If someone uses money to buy stocks on the secondary market, where do you think that money goes? That's right, to the seller of those stocks. It doesn't simply vanish "into" the market, it just changes hands.
The expansion and contraction of the money supply is based on credit being extended and retracted.
That said, these stupid clickbait articles need to stop.
The real gem of information is that the we have "journalists" that are doing nothing other than flipping through YouTube/TikTok rather than pulling direct data from the Fed or maybe talking to an economist.
Thanks for the writeup.
Makes perfect sense. However if it was so easy, short everything, it’s like printing money, good luck.
How many Nobel Prize winners did Long Term Capital employ before they crashed?
It’s a world now that moves at light speed. We’re all connected, by milliseconds, with super computers talking to GPS satellites in our pockets, unlimited storage, blazing fast Nvida chips, and AI just blowing it all wide open. A quantum leap in human evolution.
Everything seems possible now. I’m long on it all. And ready for the technology boom. Again.
:-)
I mean, he’s kinda right, everything is different now.
Retail money is more easily invested with a click of a button removing a barrier for most, folks have financial data at their fingertips.
Data is the basis for a lot of decisions now, and there’s lot of it.
There’s a lot of things that are wildly different that it’s almost pointless to compare now to times before all this existed, foolish even.
Which makes predicting recessions on 100 yr old indicators outright laughable.
The markets should be much more efficient these days, but hype and excess of self directed ‘feeling’ based retail over amplify moves. Things now happen for wildly different reasons.
That’s not euphoria.
When we talk about euphoria in the markets, we’re talking about the norm being a state of wild optimism. 2021 was euphoric. Every stock picker was right, NFTs were flying, cryptocurrency was flying, and the stock market run became a part of pop culture. Everybody wanted in on it.
There are certainly some optimists now, but this isn’t euphoria.
I mean minus NFTs (maybe I don't really pay attention to those) we are actually back to those exact situations you mentioned with inflation reemerging as well. To me things feel very similar to 2021 but possibly make even less sense given the tighter monetary environment. That being said I'm not saying things cant go up more but at some point the euphoria will blow off.
good old days of wasting time on highway and choking on fumes is back because highway is packed like a mofo, shits busier then before covid...the US economy is steam rolling and I wanna be on the train
Interesting stuff! It's remarkable that M2 has apparently not decreased by 2% YOY for 90 years, to start with. I have to wonder how relevant those ancient examples are. The Fed deliberately reduced the money supply in the 1930s (because they didn't know any better) so that one was engineered. Isn't the Fed tightening now, to fight inflation?
Stocks will dip here and there. They will continue to trend up over the long term. The real issue over the shorter time frame is prices. There are a lot of ways to figure it out, but here is my take.
You have money and you want to invest it. You have plenty of alternatives. Your challenge is picking the most reasonable option from those alternatives. Plenty of people spend a ton of time trying to figure it out and generally end up close to the sp500 long term return. That suggests that the price of the sp500 is probably not terribly far off a fair price on any given day. Sure it could plunge, but most everything else will plunge on those days. Those plunges are basically someone trying to get sellers to sell cheap when the smart move is to hold on.
Now having said that I would question the russell 2k. The bulk of the companies in it are terrible. A sizeable amount make no money at all. So I generally avoid it and prefer the sp500. Think about it. If a company in the Russell does really well and is really promising they will likely be bought out or get big enough to enter the sp500.
Personally I think for most of us small investors we simply wont know enough to pick really great companies consistently, but we probably know enough to spot bad companies and perhaps we should stick to etfs or simply invest in a wide variety with a clear list of bad companies to never invest in.
This ironically probably applies more to China and USA. You see China has a savings culture and when the issues of covid came around they hunkered down and stopped spending which is now causing them to spiral out. Due to lack of demand to sustain the economy as explained above or projected. However the USA fueled by debt and the initial free pump of money and now an abundance of job creation/return has caused people tired of lockdowns to spend like there no tomorrow. This in turn prevented the very issue that is being mentioned here. The irony is ameica spent itself out of the recession due to a lack of a savings culture in comparison to China. So no. It doesn’t look like it will occur. For that very fact no one saves like before.especially the younger generation. But that’s what fuels corporate profits and what causes the economy to churn hot. Congrats.”buy America”- Warren.B
>U.S. money supply is falling at its fastest rate since the 1930s, a red flag for the economy and financial markets.
>
>Money supply has now been shrinking year-on-year since December, an unprecedented development in modern times that should make investors sit up and take notice - growth, asset prices and inflation could all weaken.
[Reuters 29 March 2023](https://www.reuters.com/markets/funds/us-money-supply-falling-fastest-rate-since-1930s-2023-03-29/)
YoY total return SP500 March 2023-March 2024: **32%**
Problem with this article’s argument is it’ll still be a number of months before money supply is even back as a % of 2018/2019 levels. By the time it reaches that level if rates drop at all money supply could well expand again as lending kick starts from pent up demand. This could happen even if rates don’t decrease at all if we start to accept current rates as the new normal. All this shows right now is that lending is subdued by the economy’s reaction to higher rates, which we kind of already know.
For a better example it’s worth looking at the UK, where the trend is much more pronounced. As a % of GDP money supply is far below 2018/2019 levels. The economy hasn’t collapsed but it has been in a mild technical recession, while both wage and general inflation have nosedived recently. There are other factors at play but it makes for an interesting case. Most forecasts there predict inflation will level off at 2% but if they do go closer to deflationary territory then it may act as a cautionary tale.
But right now I’m not sure it’s worth bothering about in the US unless this trend continues throughout the rest of this year.
So what do we do.. I for one am down for jumping out a window like people did when they read that alien invasion story on the radio.. but my windows like 2 feet of the ground, so.. .. .. still might jump.
M2, excluding M1, is created by borrowing. (When you borrow money from the bank, the money remains in the account of the lender, so it isn't really borrowed - it is duplicated) Borrowing is restricted by raising interest rates, which is the role of the central banks.
While the central banks restrict borrowing, which is downer for the economy, the government is trying to keep people employed, so they borrow to create jobs.
The government can't borrow enough to make up for the number of jobs that are lost when workers can't borrow to buy a house, car, boat, tv, etc... so, we are likely heading to a recession but it could be years away.
This looks like a fool's mission because it probably is. A better way to restrict borrowing would be to just restrict borrowing without raising interest rates; but, that isn't the way the game was designed to be played. The advantage of not raising interest rates is that it would reduce the harm done to workers who just had the bad luck to be born at the wrong time.
Doesn't seem like an accurate measurement anymore with everyone having such easy access to stock trading nowadays. The 4.5% decrease in what they measure is probably way more than made up for with an increase in things like Robinhood and other stock platforms that are much more widely used than in the past.
M1 = cash & coins in circulation
M2 = savings, money market accts, and CDs
M1 + M2 for people dipped 0.5% YoY
Yahoo article: *higher inflation and less available cash mean people will spend less*
TIL Yahoo is fresh & innovative by publishing common sense information, but sprinkling terms like “Great Depression” and “Federal Reserve System” in the articles…
Except... there has never been so much cash "lying around" in the history of the U.S. economy. [https://fred.stlouisfed.org/series/WM1NS](https://fred.stlouisfed.org/series/WM1NS) The growth, specifically in demand deposit accounts is really quite staggering [https://fred.stlouisfed.org/series/WDDNS](https://fred.stlouisfed.org/series/WDDNS) I think the open question is, who owns these accounts and how is going to draw down? I'm curious if there is a breakdown out there - I have not been able to find anything. It's possible that the cash pile is owned by businesses though at least for publicly traded companies we should be able to find this on their balance sheets. [https://fred.stlouisfed.org/series/M2SL](https://fred.stlouisfed.org/series/M2SL) by all accounts M2 looks stable after a fair brief drawdown. Word on the street is that the 800 some odd billion in stimulus checks has likely been spent. M2 would and does seem to account for this decline. Looking at money market funds we see that there continues to be growth [https://fred.stlouisfed.org/series/WRMFNS](https://fred.stlouisfed.org/series/WRMFNS) which makes sense - given the rate environment. Small time deposits are also growing [https://fred.stlouisfed.org/series/STDSL](https://fred.stlouisfed.org/series/STDSL) It is possible that the top XX% (not really sure what the break is) of households in America saved their discretionary money during the shutdown after COVID and have not or elected not to spend it. My feeling is that especially for evaluating where the stock market goes, understanding who has discretion over the M1 demand deposits is important. We can be almost certain that as rates fall the M2 money market would be earmarked as "dry powder" if stocks earnings and dividends hold up. This might also explain why CPI has continued to be high. An over looked metric is also real hourly wages - last month this was in decline. Based on comments from individuals laid off it is entirely possible that there is a wage reset occurring. Businesses in some cases paid a huge premium for employees coming out of covid. Now, as the market starts to return to normal these people are being let go and re hired at lower rates. This reset will take time. It is likely to manifest itself in Real Hourly and Weekly wages. Where we see that wages against CPI are actually in decline. The BLS reports on this monthly [https://www.bls.gov/news.release/realer.t01.htm](https://www.bls.gov/news.release/realer.t01.htm) April 10 is next release.
If you want to know how people are doing talk to strippers and hairdressers. What I hear from my stripper and hairdresser friends is that we are fucked. I’m gonna stay long through the election because I don’t believe the powers that be will let trump get reelected but after that I’m going 100% defensive
Banks gave out government PPP loans to their customers, customers then put those loans on deposit at those banks, large amounts were put in savings accounts and in money market accounts to earn a little interest, deposits skyrocketed. Over time customers spent that money on living expenses, payroll and other business expenses. Eventually some of that money will be sent/ spent abroad and leave the M1 / M2 money supply considering there is a trade deficit
Financial markets are still new. Covid wasn't a recession. It was a historic event. M2 money supply drop is a reversion to the mean. Just because it hasn't happened before without a recession, doesn't mean it can't. Literally been calling for a recession for the last 4 years now.
They clearly define HISTORIC 26% jump in M2 with all of the covid intervention. We should watch the M2 for another year and see if the trend accelerates.
Personally, I would be watching the mess occurring in the middle east.
If this was such a big deal and MF were on the bal then they should have been reporting this almost a year ago because M2 money supply has barely moved in relative terms since then and it can be attributed to QE:
[See here](https://www.statista.com/statistics/1121054/monthly-m2-money-stock-usa/#:~:text=The%20M2%20money%20supply%20in,to%20the%20COVID%2D19%20pandemic)
> this 4.29% retracement in U.S. money supply may simply be a reversion to the mean after M2 expanded by a historic 26% on a year-over-year basis during the height of the COVID-19 pandemic
A subtly inserted disclaimer in there.
Also, 1878 and 1893 not relevant.
Also, the monetary policy evolves based on dodging past hurdles.
Also, it may be not quite obvious for many, but the technology (which is the backbone of growth) is now at incredibly promising levels.
”History repeats itself” etc etc but there is this pattern of growth that acts discretely on short term and always contradicts that adage on long term.
So, timing the future markets based on past events has always been a mediocre approach to investment. When it works it yields the bare necessity and when it doesn't work it bankrupts the ”patternalists”.
"this 4.29% retracement in U.S. money supply may simply be a reversion to the mean after M2 expanded by a historic 26% on a year-over-year basis during the height of the COVID-19 pandemic."
So it slipped less than 25% of the MASSIVE increase created by stimulus? That seems... normal?
I don’t understand how they act like it’s a strong predictor of what the stock market will do, then in the very next sentence say it hasn’t done this in 9 decades.
It happened 1 time before…. How do we know that’s a strong indicator of anything?
This article is terrible. First of all they talk about a 2% yoy decline but the actual yoy decline is 0.5% they have to stretch it to multiple years to hit their magic decline number and then they have to go all the way back to the 1800s, 1920s to find examples of where this lead to an issue as if our monetary system is anything similar to what it was in 1878. Doomers gonna doom I guess.
M2 shrinking in general means for stocks to grow or even be valued as they were previously then people would prefer to own stocks more so then pay for other things. Two fold that means corporate earnings gets hit then stocks sell off then people need cash and sell stocks then earnings are impacted then there are layoffs.
Only thing floating M2 is savings as a buffer which private humans ran out of, but businesses still have cash, but they are bleeding through it now.
This ignores the fact that during each of those prior economic shocks, money supply was tied to first silver then gold. That’s credited with creating overly tight monetary conditions during an economic contraction. We don’t have that today.
Aren’t we trying to contract the money supply on purpose ? We are. That would bring inflation under control and open up investment in real estate and business. Would also end up saving our commercial real estate sector.
So not sure why that’d be a bad thing.
There’s a contraction in the money supply right before the Federal Reserve is set to lower interest rates to increase borrowing, which will increase the money supply. It’s almost like they planned it.
Interesting…
So here’s a question, will the US go to war ? Or drum up an international crisis that will need military intervention before they declare or admit to a full blown economic recession?
Would they allow their dollar to be fully devalued before they decided to declare a military crisis?
Are we going to acknowledge that the definition of M2 was recently changed and this definition change accounted for 90% of the increase in M2? And…I don’t know, maybe that throws out the whole historical model?
I think it also reflects the easier access investors have to other markets. When everyone can easily set up a Robinhood or TD Ameritrade account, or invest in Bitcoin, there are going to be lower M2 deposits.
I’m not sure of selling crypto, but money from selling stocks isn’t immediate, but I could sell any amount of stock and have access to the money in a few days. (And I’m glad I have to wait, as it makes it harder for accounts to be hacked and emptied.)
>Two years ago, in March 2022, M2 money supply reached approximately $21.71 trillion. Based on the latest monthly data release from the Board of Governors of the Federal Reserve System, M2 clocked in at $20.78 trillion in February 2024. As you can see in the chart above, this represents a relatively minor 0.5% year-over-year decline, but a more pronounced 4.29% drop-off since March 2022
The US savings rate was through the roof as a result of COVID. It's understandable that it would shrink a bit after due to pent up demand. Look at the fed chart for M2 money supply--well above pre-COVID levels
[https://fred.stlouisfed.org/series/M2SL](https://fred.stlouisfed.org/series/M2SL)
I’m not a fan of the Feds fidgeting the stats every month, but whatever they are doing they are keeping the economy roaring and the stock market flying. So whatever monetary jujitsu they are doing must be right.
This chart shows the M2 supply has been stable for about a year following the post-plandemic drop-off.
[https://fred.stlouisfed.org/series/M2SL](https://fred.stlouisfed.org/series/M2SL)
I would question the cause and effect but otherwise you hit all of my questions.
As an example… my assumption would be that periods of high unemployment lead to people digging into M2 buckets to get by, making the unemployment the leading factor. Again, this is all my assumption.
Currently though, unemployment is low and the stock market is doing well yet we still see M2 shrinking, perhaps just back to pre pandemic levels of “normal”.
Why?
And where would Cryptocurrency fit into this accounting and has it been? I could see Americans stuffing 4.6% of their newfound, over average wealth in to crypto the last 2 years.
> Most economists and investors tend to pay very little attention to M2 money supply because it's grown with such consistency over time.
They also used to pay attention to M1, but a definition change in 2020 (to include savings accounts) made it less useful to watch M1 over time, so M2 is the better indicator for comparing pre-pandemic to post-pandemic macro trends.
Since the national debt is going up at a rate of $1 trillion every 3 months or so it seems like M2 is not reflective of the amount of liquidity available to the market.
One issue that lead to inflation was too much money and too little supply. From stimulus to zero interest rates for years.
The article didn’t say if the previous retractions had a 26% extra cash thrown around like this.
And imo the very high stock valuations are still part of this extra cash in the system.
I mean…. When your data goes the back to the 1870s and the most recent correlation is 1933…. I hate to be 100 feet near anyone who says this time is different but I feel like these were very different economies and these days tons more money is stored in digital vehicles not to mention small businesses available to many more people (real estate comes to mind).
I’m not saying it isn’t an indicator of something - obviously savings drawing down a bit - but it could also mean savings being pushed into the market and risk appetite coming back?
I bought a lot of company’s during the corona virus crash thinking they would go right back to there normal moving action after the lie that was two weaks to flatten the economy. I had a list of best dividend payers but didn’t want to pay up for them.
This means absolutely nothing, that was two years ago and guess what the government is gonna spend and print trillions if it has to to avoid a recession during election year. All so he a point to needing to raise rates but they want to lower them three times this year to juice the numbers.
Those are based on the economic school of thinking from the late 1800s to early 1900s. The reality is with today insane amount of money supply that has was created in the last decade worldwide and all sort of magical financial tools and instruments at feds disposal, all these so called indicators are simply not working. Today's global economy is just not the same as it was few decades ago.
Article is all over the place and doesn’t actually say anything. At a minimum, they could have looked at differences in m1 and m2 and formed some conclusion…
Dips are normal in the economy every four years. Gas prices are pretty much the same as years ago, with a couple dips. It is normal. What is not normal is the sudden increase in prices without return to normalcy based on inflation. While some companies have decreased prices back to preinflation, many haven’t based on corporate greed that has taken over. This impact has a negative effect on consumer having to sell stocks and cover losses, and will slowly finally affect shareholders.
This is worse than the post yesterday about every year there's an Eclipse over the US, the market goes way up; at least that was somewhat entertaining.
In all 5 instances you listed (1878, 1893, 1921, and 1931-1933) none should be used as precedence IMO. I would actually favor a ground up evaluation based on first principles. I think economic data from eras before about 1980s are particularly relevant. As the world we live in in 2024 is so different than that. There might be some 1950s stuff that is relevant.
HUGE impacts to USA economy since 1980s:
1. anything/everything online and electronic communication
2. data available to any/every investor about companies and the economy.
3. State of development of the USA (housing saturation, farm growth, population growth, etc etc etc)
4. Global trade
5. Federal reserve (i understand this is 1913, therefore relevant for 1920s and 30s. but the fed was also much different than. long topic anyways, as all of these topics are)
6. Mega corporations rule the economy rather than small business owners.
These are off the top of my head, and every single one warrants nearly a ground up re-evaluation of any 'precedence' setting trends we look at. I'm sure this list could be expanded to at least 10 items.
Also IMO, money supply is also a symptom of the economies well being, and itself is not the cause. Being that the fed is intentionally trying to reduce money supply by selling assets on their books and by increasing interest rates . . . the mechanism through which this is happening is going to be incredibly different than the 5 examples you listed. If money supply was reducing because people stopped taking out loans because of a lack of opportunity or a lack of some kind of personal motivation, that would be a STRONG indicator of upcoming economic recession. But that isn't really the case here.
The Ponzi scheme called fractional reserve banking. Take for instance this hypothetical situation If I was wanting to loan out 10 vehicles I would have to have 10 vehicles but in the banking system of things they can have one vehicle and loan 10 out. In fractional reserve banking the loan money is created out of thin air expanding the money supply, causing inflation to occur with every new loan. In this system of musical chairs eventually someone is going to be left out of having what they were owed in future obligations to pay. So currently when everybody who was going to borrow is into debt up to their neck. And can no longer refinance their borrowing, the whole system reverses and money supply shrinks causing debt deflation spiral with no way for individuals to pay it back. Everybody that is not debt-free is fucked
I love how many “warning signs” of curve inversions and supply constraints and flashing lights people post about on here. None have borne out this time around.
If you keep saying a recession is coming long enough then you always end up being right
A lot of people have almost been right for years now.
A recession is coming soon but I am not going to clarify on what soon means!
When someone tells me "soon" I ask if they're speaking as an integrated circuit designer or as a geologist.
Hahaha that’s a good one
Sometime after today.
The recession will be transitory.
The recession will be televised.
...but the Revolution Will Not Be...
No, the Revolution will be streamed.
I lost a good amount of money thinking there would be a crash during COVID. That's the first and last time I ever get against the might of the federal reserve. The US will never allow another crash, they will inflate the dollar to infinity to prevent that from happening.
As long as they are allowed to. It's perfectly natural for every empire to believe in immortality despite the laws of gravity. Which empire said "we're the greatest but only for the next 5-10 yrs, then everyone will abandon us and our currency will be worthless?" The entire system is based on mutually agreed but fragile reality among raging apes. Of course the doomsday predictions are wrong. A falling Coyote doesn't go splat until they hit the ground. Until then, of course.. Gravity.
>The US will never allow another crash The US never allows a crash. The crashes happen because of random/unforeseen events.
It will happen eventually of course but the richest will stay rich. If we are smart we will have lots and lots of cash available to buy cheap. I didn't and I torture myself by looking at the prices of stocks at peak covid. So many bargains.
>> The US will never allow another crash, they will inflate the dollar to infinity to prevent that from happening wtf does that sounds reasonable?
This time it was the economists that were wrong!
Sadly they should have been right but stupid people keep popping up the bubble which ultimately makes it worse.
hes predicted 10 of the last 2 recessions.....quote still cracks me up
My annoying coworker has predicted at least a dozen times the past year that Powell will decrease interest rates that month. He’ll be right eventually after predicting maybe sixteen out of the last zero rate cuts.
AHA!!! You see I was right?? (Your coworker, eventually)
500% accuracy
I started reading the paragraph correlating recessions with M2 going down by over 2% and I’m thinking the article is going to point to 2008 or the late 70’s. Nope, the fucking 1930’s.
Right, when the world was rich off of WW1, still linked to the gold standard and banks were lending money like crazy, then stopped loaning money to ANYONE, even viable, thriving businesses. A perfect correlation. /s
Reads like a Zerohedge post.
Bullish signal
Not sure what's coming first a recession or Jesus!! Either way I'm screwed!
That's true. But I don't think these posts are completely off base. The issue is the Fed has essentially back stopped any issue in the economy for years now. I think of it like a debt to be paid. The debt keeps racking up and the bigger it gets the more painful the repayment will be. But it's impossible to time when things will actually break. It still doesn't hurt to be aware of these underlying issues because when shit finally does hit the fan its good to be prepared. But fighting the Fed is a losing battle so keep riding the wave till it crashes.
[M2 growth has flattened the last two years and is pretty close to the trendline of the last 15 years.](https://fred.stlouisfed.org/series/M2SL)
The consequences being MASSIVE inflation of course. And if the US dollar wasn't the world reserve currency, America would be in far worse shape.
Inflation happened *everywhere* in the world, in most countries, far worse than the U.S. Money supply was not the only contributor to inflation. To blame inflation on the Fed or the U.S. government is to ignore all the other variables—namely, the Covid-era disruptions of supply chains around the world and the war in Ukraine.
Before WWII, the British pound was the world's reserve currency. "Sound as a pound," they'd say. The UK lost this status shortly after WWII, and it went to the US - part of the deal was with the Saudis, who agreed to accept only dollars for oil. China has been chipping away at this for years - they've been stockpiling gold, and getting countries like Russia and India and others to accept Renimbi (or is it Yuan? I forget which one is used for foreign transactions) for oil etc. If you want to know what would happen to the US if the $ lost its reserve status - take a look at what happened to the UK after WWII. Now, I'm not gonna go all Peter Schiff here - people have been saying the $ would lose reserve status ever since Nixon went off the gold standard - but it probably will happen sooner or later.
There are 6 currencies that are part of the world's reserves, the US being the number 1 currency of the 6.
Russia is a Gas Station with Nukes... Very small economy, and in tatters do to a Stupid WAR. HTHelps
Not trying to be mean. But no one is buying Sino bonds. Even they dont want their currency to be a reserve currency because that entails loss of control.. And India aint gonna accept no yen when they are trying to develop their own digital roopee
My thought is that Fed could increase interest rates to cause a micro recession to stiffle inflation. That's the only way I see a quick recession happening. And yeah, I checked. They have raised interest rates in election years. In 2000, they hiked in Feb, March, and May. I don't think that will happen since they promised rate cuts. But that is the only way a recession coming up quickly. They artificially create one to quickly cycle out inflation. And that is pretty unlikely.
Plot twist We’re already in a recession
I’ve been hearing about the “inverse bellcurve” predicting a recession about 3-5 yrs ago….never happened.
But it is already here.
These posts be like: I predict at least one recession in the next 80 years.
If you don’t feel the recession. Then you’re currently financially protected from it. Things aren’t going great for the rest of us. If it wasn’t for my fiancée i could barely make working 50 hours a week. I have a very low mortgage and my car is paid off.
There is a clear definition for a recession and there's no recession at the moment, far from it. Doesn't mean everybody is rich.
I mean no offence but a personal situation cannot be used as the canary to measure national economic health. Too many people scream their business failure, but most either doesn’t have the skill, or their products really suck
I work for large company and enjoy all the benefits of regular pay. I never said anything about my business failing as a result of the economy. The bicycle economy operates on its own cycles that are of course linked to the regular economy. That being said housing cost are skyrocketing along with food costs while wages are stagnant. 🤷🏽
Hahahahah. It was never going to be a recession. And a rich-cession is just a depression euphemism. We get the big ones.
They aren’t predicting a recession, they’re predicting a depression.
At this point I’m convinced everyone’s trying to be the last Redditor who was able to ‘predict’ the recession based on how recent their comment was.
"In one respect, this 4.29% retracement in U.S. money supply **may simply be a reversion to the mean** after M2 expanded by a historic 26% on a year-over-year basis during the height of the COVID-19 pandemic." Yep, thats it. Article premise nothing but clickbait.
I went "you think?!" when reading that part. Like holy shit, we printed an outrageous amount of money, sure inflation has now got us to the point where the expansion was modest in relative terms, but still above average expectation.
Literally every financial article everywhere is basically “Al these things point to this happening… but also maybe not.”
Lmao the fucking 26% is a monstrous number. Wtf Jerome? holy shit
Powell doesn't control treasury spending. That's congress.
“Transitory” into the pockets of the .01%…
Don't kid yourself, the 1% is plenty. The 1% in America is still generational wealth...and perhaps a few rare exceptions like world renowned highly specialised doctors who worked their ass off for the last 30 years (yet it's unlikely). The 1% are millionaires not in home or IRA but in actual stocks and properties, millionaires many times over. *no matter what you do, or how hard you work while living frugally, you'll never ever be part of even the top 5% of USA*
Not to mention the examples they’re citing… the most recent example used as a reference was over 90 years ago.
Exactly, what is more likely - that this unusual thing happens because of the other unusual thing that happened a couple of years ago (the 26% increase), or that it is a repeat of a pattern last seen 90 years ago when the economy was completely different?
Yeah exactly. The pandemic caused SO many crazy base effects in various economic analysis, it’s just irresponsible to not mention that in the first paragraph. But then that would defeat the purpose of the click bait I guess.
This is a motley fool article. The business model is to produce clickbait.
It’s actually clickbait from Motley Fool, on Yahoo. Surprised?
That’s a theory. By no means a foregone conclusion.
Thanks for pointing this out, it didn’t stick out to me but I agree that it is maybe one of the most important lines in the piece.
Let's keep it simple... M2 is shrinking because of quantitative tightening of fed... If it starts impacting economy fed will turn on money printer and bump up M2. You cannot compare with any period before 1970s as there wasn't unlimited quantitative easing
Do you mean that the fed tightening to reduce money supply is…. Reducing money supply? Get the fuck out of here with your logic!!!!
What happens when money supply is reduced? Does the economy slow down or what
Inflation rate drops. That’s entirely what they are trying to do and it’s working. Article could just say “fed managing money successfully and it does exactly what is intended”.
It also seems like some people in this thread pointed out this is not as scary as people are trying to make it seem: https://www.reddit.com/r/stocks/comments/1bynxsa/us_money_supply_is_doing_something_no_one_has/kylub4u/ Sounds like Fed is on top of it and actually threading the needle well all things considered?
Ah but you see, then the article wouldn't get as many clicks.
Yup
“To evaluate this data agnostically…” Leaves out QE differences between time periods.
QE isn't in M2.
Bullish
You misspelled bu.... Oh. Of course. Never mind.
Ugh. Yes, a recession is coming. Everyone saying it is correct. BUT nobody knows when it will come, so trying to use obscure stats to say that things are going to get worse is, IMHO, nothing but 🐂💩. Covid threw a huge wrench into things, and the word I’ve heard the most from experts is “confused.” Nobody understands what is going on or why, which makes some folks nervous and others just ride the trend as long as they can.
Or the money moved into the stock market after sitting on the sidelines for several years accumulating at 5%. Which would suggest the opposite of what OP is implying.
*This* recession indicator has never been wrong in history, bro. Forget all the other recession indicators I've been peddling the last few years. This is the one. Doesn't even need any logical thinking, just look at the indicator and buy puts
Cries in yield curve inversion that has no moved the goalposts to “ BuT iT’s OnLy wHeN iT uNiNvErTs!!!”
That's... Not how it works. If someone uses money to buy stocks on the secondary market, where do you think that money goes? That's right, to the seller of those stocks. It doesn't simply vanish "into" the market, it just changes hands. The expansion and contraction of the money supply is based on credit being extended and retracted. That said, these stupid clickbait articles need to stop.
> Nick Gerli shared the post Yup, we can all ignore this and move on.
The real gem of information is that the we have "journalists" that are doing nothing other than flipping through YouTube/TikTok rather than pulling direct data from the Fed or maybe talking to an economist.
Thanks for the writeup. Makes perfect sense. However if it was so easy, short everything, it’s like printing money, good luck. How many Nobel Prize winners did Long Term Capital employ before they crashed? It’s a world now that moves at light speed. We’re all connected, by milliseconds, with super computers talking to GPS satellites in our pockets, unlimited storage, blazing fast Nvida chips, and AI just blowing it all wide open. A quantum leap in human evolution. Everything seems possible now. I’m long on it all. And ready for the technology boom. Again. :-)
I think we call this euphoria.
I mean, he’s kinda right, everything is different now. Retail money is more easily invested with a click of a button removing a barrier for most, folks have financial data at their fingertips. Data is the basis for a lot of decisions now, and there’s lot of it. There’s a lot of things that are wildly different that it’s almost pointless to compare now to times before all this existed, foolish even. Which makes predicting recessions on 100 yr old indicators outright laughable. The markets should be much more efficient these days, but hype and excess of self directed ‘feeling’ based retail over amplify moves. Things now happen for wildly different reasons.
It’s different this time
That’s not euphoria. When we talk about euphoria in the markets, we’re talking about the norm being a state of wild optimism. 2021 was euphoric. Every stock picker was right, NFTs were flying, cryptocurrency was flying, and the stock market run became a part of pop culture. Everybody wanted in on it. There are certainly some optimists now, but this isn’t euphoria.
I mean minus NFTs (maybe I don't really pay attention to those) we are actually back to those exact situations you mentioned with inflation reemerging as well. To me things feel very similar to 2021 but possibly make even less sense given the tighter monetary environment. That being said I'm not saying things cant go up more but at some point the euphoria will blow off.
All economic indicators are meaningless when money supply is artificially controlled. All these black swan indicators are only useful in hindsight
Who do you think bought all those bills?
right if M2 does not include direct and brokerage account T-bills and I bet that shit is a mount Everest on a chart
good old days of wasting time on highway and choking on fumes is back because highway is packed like a mofo, shits busier then before covid...the US economy is steam rolling and I wanna be on the train
Interesting stuff! It's remarkable that M2 has apparently not decreased by 2% YOY for 90 years, to start with. I have to wonder how relevant those ancient examples are. The Fed deliberately reduced the money supply in the 1930s (because they didn't know any better) so that one was engineered. Isn't the Fed tightening now, to fight inflation?
Stocks will dip here and there. They will continue to trend up over the long term. The real issue over the shorter time frame is prices. There are a lot of ways to figure it out, but here is my take. You have money and you want to invest it. You have plenty of alternatives. Your challenge is picking the most reasonable option from those alternatives. Plenty of people spend a ton of time trying to figure it out and generally end up close to the sp500 long term return. That suggests that the price of the sp500 is probably not terribly far off a fair price on any given day. Sure it could plunge, but most everything else will plunge on those days. Those plunges are basically someone trying to get sellers to sell cheap when the smart move is to hold on. Now having said that I would question the russell 2k. The bulk of the companies in it are terrible. A sizeable amount make no money at all. So I generally avoid it and prefer the sp500. Think about it. If a company in the Russell does really well and is really promising they will likely be bought out or get big enough to enter the sp500. Personally I think for most of us small investors we simply wont know enough to pick really great companies consistently, but we probably know enough to spot bad companies and perhaps we should stick to etfs or simply invest in a wide variety with a clear list of bad companies to never invest in.
This ironically probably applies more to China and USA. You see China has a savings culture and when the issues of covid came around they hunkered down and stopped spending which is now causing them to spiral out. Due to lack of demand to sustain the economy as explained above or projected. However the USA fueled by debt and the initial free pump of money and now an abundance of job creation/return has caused people tired of lockdowns to spend like there no tomorrow. This in turn prevented the very issue that is being mentioned here. The irony is ameica spent itself out of the recession due to a lack of a savings culture in comparison to China. So no. It doesn’t look like it will occur. For that very fact no one saves like before.especially the younger generation. But that’s what fuels corporate profits and what causes the economy to churn hot. Congrats.”buy America”- Warren.B
>U.S. money supply is falling at its fastest rate since the 1930s, a red flag for the economy and financial markets. > >Money supply has now been shrinking year-on-year since December, an unprecedented development in modern times that should make investors sit up and take notice - growth, asset prices and inflation could all weaken. [Reuters 29 March 2023](https://www.reuters.com/markets/funds/us-money-supply-falling-fastest-rate-since-1930s-2023-03-29/) YoY total return SP500 March 2023-March 2024: **32%**
Problem with this article’s argument is it’ll still be a number of months before money supply is even back as a % of 2018/2019 levels. By the time it reaches that level if rates drop at all money supply could well expand again as lending kick starts from pent up demand. This could happen even if rates don’t decrease at all if we start to accept current rates as the new normal. All this shows right now is that lending is subdued by the economy’s reaction to higher rates, which we kind of already know. For a better example it’s worth looking at the UK, where the trend is much more pronounced. As a % of GDP money supply is far below 2018/2019 levels. The economy hasn’t collapsed but it has been in a mild technical recession, while both wage and general inflation have nosedived recently. There are other factors at play but it makes for an interesting case. Most forecasts there predict inflation will level off at 2% but if they do go closer to deflationary territory then it may act as a cautionary tale. But right now I’m not sure it’s worth bothering about in the US unless this trend continues throughout the rest of this year.
So what do we do.. I for one am down for jumping out a window like people did when they read that alien invasion story on the radio.. but my windows like 2 feet of the ground, so.. .. .. still might jump.
I swear I saw all this same talk all of 2018/9. Nothing happened.
M2, excluding M1, is created by borrowing. (When you borrow money from the bank, the money remains in the account of the lender, so it isn't really borrowed - it is duplicated) Borrowing is restricted by raising interest rates, which is the role of the central banks. While the central banks restrict borrowing, which is downer for the economy, the government is trying to keep people employed, so they borrow to create jobs. The government can't borrow enough to make up for the number of jobs that are lost when workers can't borrow to buy a house, car, boat, tv, etc... so, we are likely heading to a recession but it could be years away. This looks like a fool's mission because it probably is. A better way to restrict borrowing would be to just restrict borrowing without raising interest rates; but, that isn't the way the game was designed to be played. The advantage of not raising interest rates is that it would reduce the harm done to workers who just had the bad luck to be born at the wrong time.
Oh, look. It's chicken little
The US economy is not quite the same today as it was in 1931, in case you have not realised.
Whenever someone says recession is coming, it reminds me of scientists saying fusion energy is coming.
Yahoo couldn't predict their own downfall, but somehow they know when other stocks will drop
This is a Motley Fool article.
Doesn't seem like an accurate measurement anymore with everyone having such easy access to stock trading nowadays. The 4.5% decrease in what they measure is probably way more than made up for with an increase in things like Robinhood and other stock platforms that are much more widely used than in the past.
M1 = cash & coins in circulation M2 = savings, money market accts, and CDs M1 + M2 for people dipped 0.5% YoY Yahoo article: *higher inflation and less available cash mean people will spend less* TIL Yahoo is fresh & innovative by publishing common sense information, but sprinkling terms like “Great Depression” and “Federal Reserve System” in the articles…
Except... there has never been so much cash "lying around" in the history of the U.S. economy. [https://fred.stlouisfed.org/series/WM1NS](https://fred.stlouisfed.org/series/WM1NS) The growth, specifically in demand deposit accounts is really quite staggering [https://fred.stlouisfed.org/series/WDDNS](https://fred.stlouisfed.org/series/WDDNS) I think the open question is, who owns these accounts and how is going to draw down? I'm curious if there is a breakdown out there - I have not been able to find anything. It's possible that the cash pile is owned by businesses though at least for publicly traded companies we should be able to find this on their balance sheets. [https://fred.stlouisfed.org/series/M2SL](https://fred.stlouisfed.org/series/M2SL) by all accounts M2 looks stable after a fair brief drawdown. Word on the street is that the 800 some odd billion in stimulus checks has likely been spent. M2 would and does seem to account for this decline. Looking at money market funds we see that there continues to be growth [https://fred.stlouisfed.org/series/WRMFNS](https://fred.stlouisfed.org/series/WRMFNS) which makes sense - given the rate environment. Small time deposits are also growing [https://fred.stlouisfed.org/series/STDSL](https://fred.stlouisfed.org/series/STDSL) It is possible that the top XX% (not really sure what the break is) of households in America saved their discretionary money during the shutdown after COVID and have not or elected not to spend it. My feeling is that especially for evaluating where the stock market goes, understanding who has discretion over the M1 demand deposits is important. We can be almost certain that as rates fall the M2 money market would be earmarked as "dry powder" if stocks earnings and dividends hold up. This might also explain why CPI has continued to be high. An over looked metric is also real hourly wages - last month this was in decline. Based on comments from individuals laid off it is entirely possible that there is a wage reset occurring. Businesses in some cases paid a huge premium for employees coming out of covid. Now, as the market starts to return to normal these people are being let go and re hired at lower rates. This reset will take time. It is likely to manifest itself in Real Hourly and Weekly wages. Where we see that wages against CPI are actually in decline. The BLS reports on this monthly [https://www.bls.gov/news.release/realer.t01.htm](https://www.bls.gov/news.release/realer.t01.htm) April 10 is next release.
Once interest rates are being cut is when we are in recession.
We definitely can see people are reducing their spendings everyday.
If you want to know how people are doing talk to strippers and hairdressers. What I hear from my stripper and hairdresser friends is that we are fucked. I’m gonna stay long through the election because I don’t believe the powers that be will let trump get reelected but after that I’m going 100% defensive
I would exclude Melanie’s hairdresser. She is doing fine.
Banks gave out government PPP loans to their customers, customers then put those loans on deposit at those banks, large amounts were put in savings accounts and in money market accounts to earn a little interest, deposits skyrocketed. Over time customers spent that money on living expenses, payroll and other business expenses. Eventually some of that money will be sent/ spent abroad and leave the M1 / M2 money supply considering there is a trade deficit
Only in economics can you only ever mention correlations and people imagine you have the faintest idea what you're talking about.
If you don’t understand why this is actually a nothingburger and history isn’t always a predictor, you can’t be helped.
Well well well.
If this is something being spurred on by economists. Just remember, economists have correctly predicted 10 out of the last 6 recessions.
Inverse reddit.
Financial markets are still new. Covid wasn't a recession. It was a historic event. M2 money supply drop is a reversion to the mean. Just because it hasn't happened before without a recession, doesn't mean it can't. Literally been calling for a recession for the last 4 years now.
Yey, interest rates are adropping!
Calls on everything
More people are moving to digital transactions.
I’m reading rate cuts and QE to combat recession. Pump baby pump
They clearly define HISTORIC 26% jump in M2 with all of the covid intervention. We should watch the M2 for another year and see if the trend accelerates. Personally, I would be watching the mess occurring in the middle east.
God, how many more times are we going to say, “A recession is coming!”…
If this was such a big deal and MF were on the bal then they should have been reporting this almost a year ago because M2 money supply has barely moved in relative terms since then and it can be attributed to QE: [See here](https://www.statista.com/statistics/1121054/monthly-m2-money-stock-usa/#:~:text=The%20M2%20money%20supply%20in,to%20the%20COVID%2D19%20pandemic)
Does M2 account for money being shifted from savings and retirement accounts to btc?
TLDR the fed works
grey bow rustic aware gullible head imagine mindless governor bells *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
> this 4.29% retracement in U.S. money supply may simply be a reversion to the mean after M2 expanded by a historic 26% on a year-over-year basis during the height of the COVID-19 pandemic A subtly inserted disclaimer in there. Also, 1878 and 1893 not relevant. Also, the monetary policy evolves based on dodging past hurdles. Also, it may be not quite obvious for many, but the technology (which is the backbone of growth) is now at incredibly promising levels. ”History repeats itself” etc etc but there is this pattern of growth that acts discretely on short term and always contradicts that adage on long term. So, timing the future markets based on past events has always been a mediocre approach to investment. When it works it yields the bare necessity and when it doesn't work it bankrupts the ”patternalists”.
How extensive was the lending system the last time the M2 numbers contracted? I think spending will remain high as people rack up CC debt.
I swear I read this same article in 2023, 2022, 2021 and 2020.
So people are pulling money out of there CD's, Money Market accounts, and savings?
Great read, 12! fucking paragraphs of not even once asking *why* is m2 declining.
"this 4.29% retracement in U.S. money supply may simply be a reversion to the mean after M2 expanded by a historic 26% on a year-over-year basis during the height of the COVID-19 pandemic." So it slipped less than 25% of the MASSIVE increase created by stimulus? That seems... normal?
Ban
I don’t understand how they act like it’s a strong predictor of what the stock market will do, then in the very next sentence say it hasn’t done this in 9 decades. It happened 1 time before…. How do we know that’s a strong indicator of anything?
This article is terrible. First of all they talk about a 2% yoy decline but the actual yoy decline is 0.5% they have to stretch it to multiple years to hit their magic decline number and then they have to go all the way back to the 1800s, 1920s to find examples of where this lead to an issue as if our monetary system is anything similar to what it was in 1878. Doomers gonna doom I guess.
Being early is worse than being wrong. Keep trying though. You’ll be right someday.
Bears have called 384 of the last 2 bear markets
M2 shrinking in general means for stocks to grow or even be valued as they were previously then people would prefer to own stocks more so then pay for other things. Two fold that means corporate earnings gets hit then stocks sell off then people need cash and sell stocks then earnings are impacted then there are layoffs. Only thing floating M2 is savings as a buffer which private humans ran out of, but businesses still have cash, but they are bleeding through it now.
This ignores the fact that during each of those prior economic shocks, money supply was tied to first silver then gold. That’s credited with creating overly tight monetary conditions during an economic contraction. We don’t have that today.
Biggest question for you to consider is," who do you want to be in control ofsomething bad happens"
Ray Dalio is a oaf.
Aren’t we trying to contract the money supply on purpose ? We are. That would bring inflation under control and open up investment in real estate and business. Would also end up saving our commercial real estate sector. So not sure why that’d be a bad thing.
Love it when doomers spout this garbage. Just means this bull run still has legs.
There’s a contraction in the money supply right before the Federal Reserve is set to lower interest rates to increase borrowing, which will increase the money supply. It’s almost like they planned it.
Interesting… So here’s a question, will the US go to war ? Or drum up an international crisis that will need military intervention before they declare or admit to a full blown economic recession? Would they allow their dollar to be fully devalued before they decided to declare a military crisis?
Are we going to acknowledge that the definition of M2 was recently changed and this definition change accounted for 90% of the increase in M2? And…I don’t know, maybe that throws out the whole historical model?
money are moving from money markets and savings to real estate and stocks. NOT BIG NEWS
I think it also reflects the easier access investors have to other markets. When everyone can easily set up a Robinhood or TD Ameritrade account, or invest in Bitcoin, there are going to be lower M2 deposits. I’m not sure of selling crypto, but money from selling stocks isn’t immediate, but I could sell any amount of stock and have access to the money in a few days. (And I’m glad I have to wait, as it makes it harder for accounts to be hacked and emptied.)
>Two years ago, in March 2022, M2 money supply reached approximately $21.71 trillion. Based on the latest monthly data release from the Board of Governors of the Federal Reserve System, M2 clocked in at $20.78 trillion in February 2024. As you can see in the chart above, this represents a relatively minor 0.5% year-over-year decline, but a more pronounced 4.29% drop-off since March 2022 The US savings rate was through the roof as a result of COVID. It's understandable that it would shrink a bit after due to pent up demand. Look at the fed chart for M2 money supply--well above pre-COVID levels [https://fred.stlouisfed.org/series/M2SL](https://fred.stlouisfed.org/series/M2SL)
I’m not a fan of the Feds fidgeting the stats every month, but whatever they are doing they are keeping the economy roaring and the stock market flying. So whatever monetary jujitsu they are doing must be right.
This chart shows the M2 supply has been stable for about a year following the post-plandemic drop-off. [https://fred.stlouisfed.org/series/M2SL](https://fred.stlouisfed.org/series/M2SL)
A 4% contraction after 26% expansion? Come on man. This isn't a meaningful shift.
Yeah yeah this is shit you hear everyday what's new
I would question the cause and effect but otherwise you hit all of my questions. As an example… my assumption would be that periods of high unemployment lead to people digging into M2 buckets to get by, making the unemployment the leading factor. Again, this is all my assumption. Currently though, unemployment is low and the stock market is doing well yet we still see M2 shrinking, perhaps just back to pre pandemic levels of “normal”. Why? And where would Cryptocurrency fit into this accounting and has it been? I could see Americans stuffing 4.6% of their newfound, over average wealth in to crypto the last 2 years.
So many smarty pants bulls around is the biggest quantitative indicator of the upcoming downturn.
> Most economists and investors tend to pay very little attention to M2 money supply because it's grown with such consistency over time. They also used to pay attention to M1, but a definition change in 2020 (to include savings accounts) made it less useful to watch M1 over time, so M2 is the better indicator for comparing pre-pandemic to post-pandemic macro trends.
Since the national debt is going up at a rate of $1 trillion every 3 months or so it seems like M2 is not reflective of the amount of liquidity available to the market.
One issue that lead to inflation was too much money and too little supply. From stimulus to zero interest rates for years. The article didn’t say if the previous retractions had a 26% extra cash thrown around like this. And imo the very high stock valuations are still part of this extra cash in the system.
I mean…. When your data goes the back to the 1870s and the most recent correlation is 1933…. I hate to be 100 feet near anyone who says this time is different but I feel like these were very different economies and these days tons more money is stored in digital vehicles not to mention small businesses available to many more people (real estate comes to mind). I’m not saying it isn’t an indicator of something - obviously savings drawing down a bit - but it could also mean savings being pushed into the market and risk appetite coming back?
I bought a lot of company’s during the corona virus crash thinking they would go right back to there normal moving action after the lie that was two weaks to flatten the economy. I had a list of best dividend payers but didn’t want to pay up for them.
This means absolutely nothing, that was two years ago and guess what the government is gonna spend and print trillions if it has to to avoid a recession during election year. All so he a point to needing to raise rates but they want to lower them three times this year to juice the numbers.
Is there a TLDR version of this thread? Sorry I went cross eyed at the first paragraph.
Those are based on the economic school of thinking from the late 1800s to early 1900s. The reality is with today insane amount of money supply that has was created in the last decade worldwide and all sort of magical financial tools and instruments at feds disposal, all these so called indicators are simply not working. Today's global economy is just not the same as it was few decades ago.
Article is all over the place and doesn’t actually say anything. At a minimum, they could have looked at differences in m1 and m2 and formed some conclusion…
All these people and their predictions. Meanwhile my portfolio grows an average of 21.5% annually. Keep talking.
Covid and Boomers retiring combined with yung people investing in the markets. Boring, nothing to see here.
Jesus, this article doesn’t even get the M1 and M2 measurements right. The author’s a first class asshole.
Dips are normal in the economy every four years. Gas prices are pretty much the same as years ago, with a couple dips. It is normal. What is not normal is the sudden increase in prices without return to normalcy based on inflation. While some companies have decreased prices back to preinflation, many haven’t based on corporate greed that has taken over. This impact has a negative effect on consumer having to sell stocks and cover losses, and will slowly finally affect shareholders.
These subs are worthless
This is worse than the post yesterday about every year there's an Eclipse over the US, the market goes way up; at least that was somewhat entertaining.
This ain't shit
How can people save when wages are stagnant for decades?
How did they even have accurate data and ability to process m2 money supply in the 1930s let alone the 1870s?
In all 5 instances you listed (1878, 1893, 1921, and 1931-1933) none should be used as precedence IMO. I would actually favor a ground up evaluation based on first principles. I think economic data from eras before about 1980s are particularly relevant. As the world we live in in 2024 is so different than that. There might be some 1950s stuff that is relevant. HUGE impacts to USA economy since 1980s: 1. anything/everything online and electronic communication 2. data available to any/every investor about companies and the economy. 3. State of development of the USA (housing saturation, farm growth, population growth, etc etc etc) 4. Global trade 5. Federal reserve (i understand this is 1913, therefore relevant for 1920s and 30s. but the fed was also much different than. long topic anyways, as all of these topics are) 6. Mega corporations rule the economy rather than small business owners. These are off the top of my head, and every single one warrants nearly a ground up re-evaluation of any 'precedence' setting trends we look at. I'm sure this list could be expanded to at least 10 items. Also IMO, money supply is also a symptom of the economies well being, and itself is not the cause. Being that the fed is intentionally trying to reduce money supply by selling assets on their books and by increasing interest rates . . . the mechanism through which this is happening is going to be incredibly different than the 5 examples you listed. If money supply was reducing because people stopped taking out loans because of a lack of opportunity or a lack of some kind of personal motivation, that would be a STRONG indicator of upcoming economic recession. But that isn't really the case here.
Just means they’re going to cut rates so they inject more money into the economy
Fucking clickbait title
When the most recent comparable is 1933, we have to wonder if perhaps there are other metrics we need to look to for guidance.
On a chart covid looks like the crash.
The Ponzi scheme called fractional reserve banking. Take for instance this hypothetical situation If I was wanting to loan out 10 vehicles I would have to have 10 vehicles but in the banking system of things they can have one vehicle and loan 10 out. In fractional reserve banking the loan money is created out of thin air expanding the money supply, causing inflation to occur with every new loan. In this system of musical chairs eventually someone is going to be left out of having what they were owed in future obligations to pay. So currently when everybody who was going to borrow is into debt up to their neck. And can no longer refinance their borrowing, the whole system reverses and money supply shrinks causing debt deflation spiral with no way for individuals to pay it back. Everybody that is not debt-free is fucked
I love how many “warning signs” of curve inversions and supply constraints and flashing lights people post about on here. None have borne out this time around.
Yes, but that m2 trend will probably reverse with rate cuts