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Tag: money supply
Earlier this week we wrote an article about how we believe that Gross Domestic Income (GDI) better reflects economic reality than does Gross Domestic Product (GDP). GDI is falling as one would expect as the Fed has shrunk the money supply. The money supply as measured by M2 contracted by 3.6% year-over-year in the month … Continue reading Shrink The Money Supply, Shrink The Economy
The money supply and commercial bank deposits are shrinking as interest rates move higher - which suggests a forthcoming credit crunch. However, if you want a less academic leading indicator, look to the venture capital industry. The NVCA and Pitchbook have published Q2 venture data HERE. The data shows shrinking deal velocity, volumes and valuations. … Continue reading The Money Supply, Bank Deposits and Venture Investing As Leading Indicators
Liquidity, not just interest rates, drives markets. Despite the Fed's modest QT program, the Money Supply as measured by M2 sits near an all-time high. M2 grew from $15.9 Trillion in January 2020 to a peak of $22.1 Trillion in April 2022 (+39%) and sits around $20.9 Trillion (-5%) today. We have barely pulled any … Continue reading Liquidity, Not Just Interest Rates, Drives Markets
The Fed allowed a modest amount of Treasuries and a larger position of Agency securities to run off its balance sheet the week ended March 29th 2023. However, when one considers the Fed’s bail out facility – the Bank Term Funding Program (BTFP) - it is clear we entered a period of Quantitative Easing (QE) … Continue reading The Fed’s Balance Sheet Reduction (QT) Update
The Fed slightly reduced its T-Bill holdings this week. That was the extent of its QT effort. Meanwhile, crypto lender Silvergate went down for the count earlier this week. In addition, Silicon Valley Bank (ticker: SIVB) lost 60% of its market value on Thursday and is off another 22% in the aftermarket as Tech VC … Continue reading The Fed’s Balance Sheet Reduction (QT) UpdatePremium
The Fed essentially did nothing this past week in terms of tightening the money supply. QT hasn't been nearly as aggressive as the Fed's QE efforts - especially when you consider the cumulative effect of QE from 2009-early 2022. This Fed's ideology is not aligned with getting CPI down to 2% as I wrote back … Continue reading The Fed’s Balance Sheet Reduction (QT) Update
The Fed continued to modestly tighten monetary policy this week with a modest Treasury holding reduction of $32 billion. The Fed is approaching neutral monetary policy at this juncture but is not quite there. For commentators to suggest that Fed policy is restrictive is hogwash. Recall that CPI is still north of 6% (higher in … Continue reading The Fed’s Balance Sheet Reduction (QT) Update
Regardless of where CPI lands tomorrow, my view is that the Fed will hold rates higher for longer than the market believes. Higher interest rates combined with a shrinking money supply (QT), translates to: tighter monetary conditions, a higher cost of capital, less revenue visibility for companies, more employee layoffs and a deeper recession. The … Continue reading Tomorrow’s CPI = Noise
The Fed's tightening game is more than a one-trick pony. Quantitative Tightening ("QT"), is equally if not more important to monetary policy than the Fed Funds Rate. The Money Supply & QT. The Fed reduces the size of its balance sheet by selling holdings or allowing holdings to mature. Both methods result in money being … Continue reading The Money Supply & QT
The Fed's balance sheet was essentially unchanged over the week-ended January 11th. Treasuries: The Fed’s Treasury security holdings were $1.2 billion lower over the last week and $58.2 billion lower on a rolling 4-week total basis. Agencies: The Fed’s Government Agency security holdings were unchanged over the last week and $17.2 billion lower on a … Continue reading The Fed’s Balance Sheet Reduction (QT) Update
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