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Tag Archives: Money Supply

What Taper? Fed Adds $126 Billion to Balance Sheet in November

The Fed added $82 billion in Mortgage-Backed Securities (MBS) and $65 billion in Treasuries to its balance sheet while allowing $22 billion in repo agreements to roll off the balance sheet. The net gain was $126 billion in the month that the “taper” was set to begin.The Fed autopilot buying targets about $120B in monthly purchases split by $40B in MBS and $80B in US Treasuries. The stated objective is to decrease purchases by $10B per month in Treasuries and $5B per month in MBS. This...

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Money Supply Growth Accelerates Into Year-End

So much for fighting inflation.Despite the Fed’s announcement that quantitative easing tapering would begin this month, money supply growth appears to be accelerating.In the latest period, M2 increased by $193 billion, eclipsing the $21 trillion mark. This represents a 0.91% month-on-month increase. That annualizes to 11.6%. This is above the six-month average indicating money supply growth is accelerating.Last week, a technical price analysis showed gold and silver looking very bullish...

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Money Supply Grows Almost 10% Annualized and Nears $21 Trillion

In the latest period, M2 increased by $163 billion and sits just shy of $21 trillion. This represents a 0.78% MoM increase which annualizes to 9.8%. This is below last month’s rise of $254B and last September’s rise of $223B.The table below shows the change in M2 over different period lengths. All numbers have been annualized for consistency. As can be seen, the growth in M2 is decelerating compared to the 6-month, 1-year, and 3-year average growth rates. The charts below put the growth...

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Is Powell Right About Inflation?

If we believe what its chairman is saying, the Fed does not seem to know what inflation is. The Wall Street Journal of Friday wrote (Nick Timiraos, “Powell Says Supply-Side Constraints Have Worsened, Creating More Inflation Risk,” October 22, 2021): “Supply-side constraints have gotten worse,” Mr. Powell said Friday at a virtual conference. “The risks are clearly now to longer and more-persistent bottlenecks, and thus to higher inflation.” The economic definition of...

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Fed Absorbs $60B of 1-5 Year US Treasuries in September

The Fed balance sheet stands at $8.45T, up $115B from the prior month end, but down in the past week by $42B. The chart below shows how the Fed Balance sheet has grown by instrument over the last 18 months.The Fed autopilot buying targets about 120B in monthly purchases split by $40B in MBS and 80B in US Treasuries. As the numbers show, this is not exact, but an approximation. The latest month added $56B in MBS and almost $84B in Treasuries, offset by “Other” dropping $26BThe “Other”...

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M2 Grows at Fastest Pace Since February

In the latest period, M2 increased by $263B. This is a major jump compared to the last two months and is the highest month-over-month growth since February. The same period in 2020 saw M2 only grow $62B.The table below shows the change in M2 over different period lengths. All numbers have been annualized for consistency. As can be seen, the growth in M2 is accelerating compared to the 6-month, 1-year, and 3-year average growth rates. A growth rate of 16.5% is extremely high, but it is...

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Endogenous and exogenous steering

You occasionally see people debate whether money is “endogenous” or “exogenous”. I will try to explain that debate using the analogy of endogenous and exogenous steering of a car. Imagine a road network with a series of relatively straight but bumpy highways, and then occasional intersections where people can turn onto an alternative highway, which is also straight but bumpy. On the straight sections, drivers occasionally nudge the steering wheel to the left or right...

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Inflation is a monetary curse

Goldmoney Insights Remarkably, in a speech on monetary policy given at the Jackson Hole conference last Friday, Jay Powell never mentioned money, money supply, M1 or M2. With money supply expanding at a record pace to fund both QE and intractable budget deficits the omission is extraordinary. The FOMC (the rate setting committee) appears to no longer take the consequences of monetary expansion into account. But the fact is that rising consumer prices caused by monetary expansion have driven...

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While Fed Talks About Taper, Balance Sheet Grows 111B In Aug

Recent TrendsThe Fed balance sheet stands at 8.33T, up 111B from the prior month end, but down in the past week by 9.9B. The chart below shows how the Fed Balance sheet has grown by instrument over the last 18 months. The major surge from COVID can be clearly seen as 2.5T was added within 2 months. The monthly changes since reflect QE on autopilot.Autopilot targets about 120B in monthly purchases split by 40B in MBS and 80B in US Treasuries. As the numbers show, this is not exact, but an...

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Money Supply Growth Rebounds But Trend Is Down

M2 Money Supply is measured by the Federal Reserve to calculate the amount of money in the financial system. Historically, the term  was defined as an expansion of the money supply that  led to higher prices. Therefore increases in M2 is the measure of inflation. This analysis reviews the changes in money supply as a potential indication of future price increases.Recent TrendsM2 used to be released weekly, but in 2020 this was changed to a monthly frequency. The chart below shows the...

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