Data from https://fred.stlouisfed.org/series/WM2NS
No, asset prices are not being inflated by increased money supply any more; for those of you still pushing that narrative, quit it.
This is probably why the Fed announced a pullback on the rate of QT.
I don't have anything more to say, I just got sick of hearing this theory so I decided to see if it had any merit; it doesn't. It did, 2 years ago, but it doesn't now.
https://i.redd.it/1iy6uwqxg27d1.png
Posted by Scedasticity1
12 Comments
Remember when we gave a shit about overnight repo rates? I kinda miss those times. Bears would feel right at home
What’s a few trillion between friends?
Ah so the assets will stop inflating on a dime just like that, or might it take months and months for this slowdown to be absorbed by the market.
It’s monetary base you want to look at for asset prices. Not M2.
[https://fred.stlouisfed.org/series/BOGMBASE](https://fred.stlouisfed.org/series/BOGMBASE)
We’ve been pumping liquidity since March 2023 with the BTFP.
Plus this doesn’t take into account how global printed currencies inflow to US assets. In our globalized world with strong USD, money printed in Japan and China, for instance, are definitely affecting USD liquidity.
I mean, kinda. I’m old enough to remember the last time they fired up the printers, post GFC. Then, in 2018, they decided they would finally start tighten by raising rates and reducing the fed balance sheet; it didnt take long for that to stop. All that post 2020 new money is still floating around in various forms. Just because it’s not in M2 didn’t make it disappear… https://fred.stlouisfed.org/series/WALCL#0
Didn’t the government stop reporting M2? How is this being estimated?
Cool so the second I buy more stocks it’ll drop.
The fed has also been tapering off how much reverse repo they are doing. So is that a sign that they are happy with where M2 is at?
[Overnight Reverse Repurchase Agreements: Treasury Securities Sold by the Federal Reserve in the Temporary Open Market Operations (RRPONTSYD) | FRED | St. Louis Fed (stlouisfed.org)](https://fred.stlouisfed.org/series/RRPONTSYD)
There was a pullback in QT because there wasn’t a choice. After May, the Fed would have to actively sell treasuries, instead of just letting them roll off, in order to meet the 60B/month mandate.
Explain this to me like i am 5 years old.
Base money and M2 haven’t been good guides to CPI. If you index them all to the same date, base money flies ahead, making CPI look like a straight line.
One possibility is that the Fed has enough credibility to create an invisible liability on money. People don’t believe that money will be allowed to fully translate to inflation, so the monetary reaction function nets out to relatively modest CPI/PCE growth.
Nominal wage growth, nominal GDP, PCE/CPI, stock movements, and interest rates are clumsy, but more useful measures of where things are, and where they are going.
So, no more crazy stock price bullish trends in the middle of the direst economic situation in the whole world?