TEK2day

For a more accurate read on price inflation than the tall tale spun by the CPI, look no further than growth of the money supply. It is the forever growing money supply that enables the Federal Reserve to spend $120 Billion per Month on purchases of Treasuries and Government Agency Securities to maintain artificially low interest rates. It is the rapidly expanding money supply that will enable the Federal Reserve to monetize the U.S. fiscal deficit which will be in the $3 Trillion range this year. It is the expanding money supply that enabled Trillions of dollars in debt-funded stimulus to occur over the past 15 months – much of which found its way into the equity markets (our analysis HERE), alternative speculative “assets” and the real economy. When the money supply is expanded without a commensurate increase in productivity, that slack manifests itself in price increases. We have observed this phenomenon across asset classes for well over a year. Look to M2 growth as a proxy for true price inflation. The below chart details M2 growth on a year-over-year basis measured weekly and tells a more accurate story of double-digit percentage inflation than the narrative spun by the Fed’s ever evolving, self-selected basket of goods (“CPI”), which speaks of an unrealistic mid single-digit percentage rate.