Kathianne
10-06-2023, 01:29 AM
Two articles in one day. I sorta, kinda get what they're saying:
https://www.foxbusiness.com/economy/new-data-reveals-crash-not-since-great-depression-could-hit-2024
OPINION Published October 5, 2023 2:00am EDTNew data reveals a crash not seen since Great Depression could hit in 2024
If the White House and Congress don't cut spending soon, the results could be catastrophic
By Justin Haskins FOXBusiness
As the White House continues to tout the alleged achievements of the president’s "Bidenomics" agenda, a growing amount of data indicates that a gigantic economic crisis could be right around the corner.
Most disturbingly, one important economic indicator that’s currently flashing hasn’t appeared since the 1930s, during the height of the Great Depression.
If the White House and Congress do not cut inflation-causing government spending soon, the results could be catastrophic.
Biden
President Biden speaks about inflation in the Roosevelt Room of the White House in Washington, D.C., on Dec 13, 2022. (Drew Angerer / Getty Images)
Historical Context
In 2020, during the height of the coronavirus government lockdowns, President Donald Trump and the Democratic-led Congress spent vast amounts of money to keep the economy, financial system and stock market afloat. Trillions of dollars in additional government spending occurred, all of which was financed with debt and money printing.
US RECESSION REMAINS ‘MORE LIKELY THAN NOT,' DEUTSCHE BANK WARNS
The never-before-seen levels of money creation were fueled by policies set by the Federal Reserve, which encouraged Congress to spend more money and kept interest rates extremely low, despite warnings from economists about the threat of future inflation.
When President Biden entered the White House in January 2021, it appeared that the economic crisis caused by the pandemic lockdowns would end soon. A COVID-19 vaccine had been developed, and many states had already started reopening or preparing to reopen their economies.
'Varney & Co.' host Stuart Varney argues House Republicans led by Rep. Matt Gaetz moved spending and budget policy backward.video
Stuart Varney: Republican 'chaos' will allow Democrats to keep on spending
'Varney & Co.' host Stuart Varney argues House Republicans led by Rep. Matt Gaetz moved spending and budget policy backward.
But rather than return spending to normal levels, Biden and congressional Democrats — with the blessing of the Federal Reserve — opted to keep government expenditures significantly higher than they had been prior to the pandemic.
The decision to continue high levels of government spending, coupled with the Fed’s choice to keep interest rates low and the fallout from the crisis in Ukraine, caused inflation to soar to levels not experienced in four decades. Prices for nearly all consumer items, from eggs and milk to gasoline, skyrocketed.
...
https://www.wsj.com/finance/monetarism-is-back-it-may-not-last-decae7bf?st=wb37tzg8ugfuyc3&reflink=desktopwebshare_permalink
Monetarism Is Back. It May Not Last.Some on Wall Street predict bad times because of an unprecedented drop in the money supply
James Mackintosh
Updated Oct. 6, 2023 12:01 am ET
The Federal Reserve’s approach to money supply has evolved over the past several decades. PHOTO: HAROLD M. LAMBERT/GETTY IMAGES
Disciples of Milton Friedman are delighted: Monetarism seems to be working again, three decades after the economic theory was ditched as the guiding light of central bank policy.
Their happiness is tempered by concern, however, that the supply of money—the core variable at the heart of monetarism—is shrinking. This suggests the Federal Reserve, Bank of England and European Central Bank have gone too far and bad times are ahead.
The Fed focused on controlling the money supply under Chairman Paul Volcker from 1979, but slowly moved back to concentrating on the price of money, the interest rate. In 1993, the Fed stopped targeting the money supply entirely, as Chairman Alan Greenspan told Congress that the long-run relationship between money supply and inflation “seems to have broken down.”
This directly contradicts the thesis of monetarism, as set out by Friedman, a winner of the Nobel Prize in economics. “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output,” Friedman wrote in 1970.
Greenspan was right, and for a quarter of a century Friedman was wrong. There was essentially no link between any of the various measures of money supply and inflation through the 1990s, 2000s and 2010s.
The pandemic and the emergency response has reinvigorated monetarists, especially investors, who point out that the massive growth in the money supply predicted inflation with a lead of 18 months. The slowdown in the money supply then predicted lower inflation, again with a lead of 18 months.
Monetarists are now concerned about an unprecedented fall in the money supply year over year, at least as measured by M2, which adds bank notes, checking-account balances, retail money-market funds and low-value time deposits.
In the eurozone and the U.K., the money supply is also falling, including on broader, M3 and M4 measures that add other forms of money, such as business bank accounts, but are no longer produced by the Fed.
“It would be foolish to ignore the monetary shrink,” said Matthew McLennan, co-head of global value at First Eagle Investments. “Monetary policy’s starting to look pretty tight.”
The question is whether looking at the money supply offers a useful guide to how far the Fed is restricting the economy, or if interest rates and bond yields are the better guide.
The argument for focusing on quantity is simple: When inflation is high, it is the money supply that matters.
A paper by the Bank for International Settlements this year concluded that there’s no link between the quantity of money and inflation when inflation is low. But in a high-inflation regime, money supply is a near-perfect indicator. Looking at the money supply would have helped economic predictions after the pandemic, not only for individual countries but also when comparing inflation between countries.
“The countries that printed the money had the inflation,” said Richard Woolnough, a fund manager at M&G Investments, comparing developed with emerging markets. “The countries that didn’t print, or couldn’t print, didn’t.”
...
https://www.foxbusiness.com/economy/new-data-reveals-crash-not-since-great-depression-could-hit-2024
OPINION Published October 5, 2023 2:00am EDTNew data reveals a crash not seen since Great Depression could hit in 2024
If the White House and Congress don't cut spending soon, the results could be catastrophic
By Justin Haskins FOXBusiness
As the White House continues to tout the alleged achievements of the president’s "Bidenomics" agenda, a growing amount of data indicates that a gigantic economic crisis could be right around the corner.
Most disturbingly, one important economic indicator that’s currently flashing hasn’t appeared since the 1930s, during the height of the Great Depression.
If the White House and Congress do not cut inflation-causing government spending soon, the results could be catastrophic.
Biden
President Biden speaks about inflation in the Roosevelt Room of the White House in Washington, D.C., on Dec 13, 2022. (Drew Angerer / Getty Images)
Historical Context
In 2020, during the height of the coronavirus government lockdowns, President Donald Trump and the Democratic-led Congress spent vast amounts of money to keep the economy, financial system and stock market afloat. Trillions of dollars in additional government spending occurred, all of which was financed with debt and money printing.
US RECESSION REMAINS ‘MORE LIKELY THAN NOT,' DEUTSCHE BANK WARNS
The never-before-seen levels of money creation were fueled by policies set by the Federal Reserve, which encouraged Congress to spend more money and kept interest rates extremely low, despite warnings from economists about the threat of future inflation.
When President Biden entered the White House in January 2021, it appeared that the economic crisis caused by the pandemic lockdowns would end soon. A COVID-19 vaccine had been developed, and many states had already started reopening or preparing to reopen their economies.
'Varney & Co.' host Stuart Varney argues House Republicans led by Rep. Matt Gaetz moved spending and budget policy backward.video
Stuart Varney: Republican 'chaos' will allow Democrats to keep on spending
'Varney & Co.' host Stuart Varney argues House Republicans led by Rep. Matt Gaetz moved spending and budget policy backward.
But rather than return spending to normal levels, Biden and congressional Democrats — with the blessing of the Federal Reserve — opted to keep government expenditures significantly higher than they had been prior to the pandemic.
The decision to continue high levels of government spending, coupled with the Fed’s choice to keep interest rates low and the fallout from the crisis in Ukraine, caused inflation to soar to levels not experienced in four decades. Prices for nearly all consumer items, from eggs and milk to gasoline, skyrocketed.
...
https://www.wsj.com/finance/monetarism-is-back-it-may-not-last-decae7bf?st=wb37tzg8ugfuyc3&reflink=desktopwebshare_permalink
Monetarism Is Back. It May Not Last.Some on Wall Street predict bad times because of an unprecedented drop in the money supply
James Mackintosh
Updated Oct. 6, 2023 12:01 am ET
The Federal Reserve’s approach to money supply has evolved over the past several decades. PHOTO: HAROLD M. LAMBERT/GETTY IMAGES
Disciples of Milton Friedman are delighted: Monetarism seems to be working again, three decades after the economic theory was ditched as the guiding light of central bank policy.
Their happiness is tempered by concern, however, that the supply of money—the core variable at the heart of monetarism—is shrinking. This suggests the Federal Reserve, Bank of England and European Central Bank have gone too far and bad times are ahead.
The Fed focused on controlling the money supply under Chairman Paul Volcker from 1979, but slowly moved back to concentrating on the price of money, the interest rate. In 1993, the Fed stopped targeting the money supply entirely, as Chairman Alan Greenspan told Congress that the long-run relationship between money supply and inflation “seems to have broken down.”
This directly contradicts the thesis of monetarism, as set out by Friedman, a winner of the Nobel Prize in economics. “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output,” Friedman wrote in 1970.
Greenspan was right, and for a quarter of a century Friedman was wrong. There was essentially no link between any of the various measures of money supply and inflation through the 1990s, 2000s and 2010s.
The pandemic and the emergency response has reinvigorated monetarists, especially investors, who point out that the massive growth in the money supply predicted inflation with a lead of 18 months. The slowdown in the money supply then predicted lower inflation, again with a lead of 18 months.
Monetarists are now concerned about an unprecedented fall in the money supply year over year, at least as measured by M2, which adds bank notes, checking-account balances, retail money-market funds and low-value time deposits.
In the eurozone and the U.K., the money supply is also falling, including on broader, M3 and M4 measures that add other forms of money, such as business bank accounts, but are no longer produced by the Fed.
“It would be foolish to ignore the monetary shrink,” said Matthew McLennan, co-head of global value at First Eagle Investments. “Monetary policy’s starting to look pretty tight.”
The question is whether looking at the money supply offers a useful guide to how far the Fed is restricting the economy, or if interest rates and bond yields are the better guide.
The argument for focusing on quantity is simple: When inflation is high, it is the money supply that matters.
A paper by the Bank for International Settlements this year concluded that there’s no link between the quantity of money and inflation when inflation is low. But in a high-inflation regime, money supply is a near-perfect indicator. Looking at the money supply would have helped economic predictions after the pandemic, not only for individual countries but also when comparing inflation between countries.
“The countries that printed the money had the inflation,” said Richard Woolnough, a fund manager at M&G Investments, comparing developed with emerging markets. “The countries that didn’t print, or couldn’t print, didn’t.”
...