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You can see how much the Fed has been propping up the economy in the M1 money stock chart [0]. They've been injecting so much cash... that's a lot of fucking m

You can see how much the Fed has been propping up the economy in the M1 money stock chart [0]. They've been injecting so much cash... that's a lot of fucking money. I think when they slow down, the market will crash. Money needs to be in circulation, and this is the only way they can get it to circulate (although, tbh, if it were in the pockets of the people, it'll probably circulate better). You can also check the velocity of money in the M2 velocity chart [1], which shows the ratio of transactions to the M2 supply. The M2 supply is the M1 supply plus some other forms of money. What the M2 velocity chart shows is that people are holding on to their money in some form and not transacting with it as much as they have before (i.e. a slow down in the velocity of money). Like, it's getting close 1!!!! So all that cash that the Fed's been injecting hasn't been able to speed up the M2 velocity back to pre-COVID times let alone pre '08 recession times. The velocity chart doesn't look too good IMO. [0]: M1 money supply https://fred.stlouisfed.org/series/M1SL https://fred.stlouisfed.org/series/M1SL [1]: M2 money velocity https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V

caeril 5y ago
Yeah, except a huge portion of that increase isn't even circulating. The only increase in circulating supply has occurred at the behest of the Trump and Biden administrations, via fiscal stimulus. As evidence for this, reverse repo operations (in which banks who have way too much excess reserves buy the Fed's assets overnight) are running close to a trillion dollars(1). Meanwhile, credit offered by banks appears to actually be shrinking. So Wells Fargo, for example, is over here sitting on more cash than it knows what to do with, and killing ~4% NIM consumer LOC facilities(2) while buying 0.1% NIM in overnight operations. I don't know if banks think default risk is rising above 3.9%, or if demand for credit is low. But something fucky is definitely going on since February. 1. https://fred.stlouisfed.org/series/RRPONTSYD https://fred.stlouisfed.org/series/RRPONTSYD 2. https://www.cnbc.com/2021/07/08/wells-fargo-is-shutting-down-all-personal-line-of-credit-accounts-.html https://www.cnbc.com/2021/07/08/wells-fargo-is-shutting-down...
throw0101a 5y ago
> You can see how much the Fed has been propping up the economy in the M1 money stock chart [0]. The change in M1 was a change in tracking rules, as explained in the Fed weblog post: * https://fredblog.stlouisfed.org/2021/01/whats-behind-the-recent-surge-in-the-m1-money-supply/ https://fredblog.stlouisfed.org/2021/01/whats-behind-the-rec...

caeril 5y ago

Yeah, except a huge portion of that increase isn't even circulating. The only increase in circulating supply has occurred at the behest of the Trump and Biden administrations, via fiscal stimulus. As evidence for this, reverse repo operations (in which banks who have way too much excess reserves buy the Fed's assets overnight) are running close to a trillion dollars(1). Meanwhile, credit offered by banks appears to actually be shrinking. So Wells Fargo, for example, is over here sitting on more cash than it knows what to do with, and killing ~4% NIM consumer LOC facilities(2) while buying 0.1% NIM in overnight operations. I don't know if banks think default risk is rising above 3.9%, or if demand for credit is low. But something fucky is definitely going on since February. 1. https://fred.stlouisfed.org/series/RRPONTSYD https://fred.stlouisfed.org/series/RRPONTSYD 2. https://www.cnbc.com/2021/07/08/wells-fargo-is-shutting-down-all-personal-line-of-credit-accounts-.html https://www.cnbc.com/2021/07/08/wells-fargo-is-shutting-down...

throw0101a 5y ago

> You can see how much the Fed has been propping up the economy in the M1 money stock chart [0]. The change in M1 was a change in tracking rules, as explained in the Fed weblog post: * https://fredblog.stlouisfed.org/2021/01/whats-behind-the-recent-surge-in-the-m1-money-supply/ https://fredblog.stlouisfed.org/2021/01/whats-behind-the-rec...