The Historic Decline in U.S. Money Supply Signals a Recession, According to This Economist
I think this is a bigger issue than the primary campaigns for the presidential election. What happens to the average person (or those who have less than average monetary reserves) if we do fall into a recession?
S E E D E D C O N T E N T
Renowned economist Steve Hanke says the sharp decline in money supply will drag the U.S. into a recession in the first half of 2024.
U.S money supply exploded during the pandemic as the government doled out trillions of dollars in stimulus. Those payments helped keep the economy afloat during a difficult time, but many economists believe they also contributed to the fierce inflation that followed. In any case, the Federal Reserve responded by tightening credit conditions at a velocity not seen since the early 1980s, and U.S. money supply is now falling at a historic rate.
Esteemed economist Steve Hanke sees that as a big problem. He recently said, "The money supply is falling like a stone, and is currently contracting at a minus 3.7% annual rate, something we have not seen since 1938." He believes the situation will culminate in a recession during the first half of 2024. But that opinion runs contrary to what the Fed is saying.
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What happens to all of us if the US falls into recession next year? How badly will this impact the average person?
It is called inflation busting and IT IS WORKING!
The Fed can now stop rate hikes. No Recession.
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Did you even read the article? A meme is a poor substitution for honest discussion.
This should be a concern for everyone because a recession will impact everyone. Will we hit a recession and will it be bad? Nobody yet knows for sure. The bright spot is that the GDP continues to grow but how much of that growth is due to federal government spending which is counted in the GDP?
Less currency is good. A glut of currency creates inflation causing the fed to raise interest. Less currency will ease inflation allowing for lower interest rates and stimulating investment. The very definition of a soft landing. Sorry to dash your hopes of a recession.
While reducing the currency in the economy can help reduce inflation, the reduction of the M2 money supply is troubling. The times where the M2 supply was negative also lines up with past recessions and the Great Depression.
I have no hopes for a recession, I have too much money invested for my retirement to want to risk a recession but IMO anybody who is ignoring the potential only has their head in the sand.
If the M2 continues to decline while an above aver inflation rate continue, there will be pressure on discretionary spending. Less available cash for cause consumers to be more careful with their spending. The result is either a soft landing with low growth or a recession. Concurrently, commercial bank credit shows that banks are now tightening their lending standards and being much more careful where they lend their money.
This may explain why the tech sector has seen more than 240,000 jobs lost in 2023, a total that’s already 50% higher than last year and growing. This is effecting the big boys, Google, Amazon, Microsoft, Yahoo, Meta and Zoom as well as startups.
Interesting, but I'm not sure it's cause for concern yet. I mean we had all kinds of economists predicting we'd be in full blow recession crisis already, but that didn't happen. Instead spending is easing slowly and the job market is still robust over all, but just now starting to respond.
Yes, something to keep an eye on but not overly concerned just yet. It is troubling news about the M2 supply. I know the Fed is trying to tell us it's not a concern as GDP continues in a healthy direction but IMO the part they are ignoring is that all that federal spending helps prop up the GDP.