Steve Saville checks in with a perfect post on money supply and the Fed
Coincidentally, I used this chart of M2 to show the drastic percent change from a year ago in US money supply in NFTRH 755. To this point we have been gauging M2 by its still bloated literal view, which the Fed is doggedly trying to deflate. But the YoY is just plain scary. Regarding money supply and the Fed, #755 noted:
Usually we have reviewed the M2 graph as it appears in literal terms. In that view it is rolling over and at high risk. But this week let’s look at the drastic drop in M2 on a percentage change from a year ago. Since 2000 the Fed has tended to ramp money supply during recessions and/or alarming market events. As you can see, they sprang into inflationary action to an epic degree in Q1, 2020. You may recall that was our signal at the time NOT TO BE ACTIVELY BEARISH and to prepare for a bullish outcome. Well, this signal shows the opposite condition shaping up. Back in Q1, 2020 you couldn’t convince the herds to be bullish and it took a while to resolve that way. Today, the same herds are not looking at signals like this. They are looking at their nominal TA and seeing the likes of the rallying SPX and NDX charts above.
The above is a blurb among other indicators and market analysis. Saville goes into a lot of detail on not only money supply and the Fed (using his True Money Supply measure), but also the banking sector and the reasons why it will not be able to come to the rescue to re-liquefy the system.
A perfect (in my opinion) blog post contains and even more perfect turn of phrase:
The Federal Reserve is like a loose cannon on the deck of a ship in a storm. It is crashing into things and generally wreaking havoc, although unlike an actual loose cannon it pretends to be the opposite of what it is. It pretends to be a force for financial and economic stability.
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