Guest Post by Bryan Lutz
“Nearly every major government is doing exactly what past printing press owners have done, but – thanks to modern technology and globalization – they’re doing it on a scale that have never been attempted before. So this time around, the entire global financial system find itself drifting inexorably toward the chaos that has claimed all previous fiat currencies.”
~ John Rubino, The Money Bubble
Nowadays, most mainstream economists believe that consistent increases in the money supply not only benefit the economy, but can pull the nation out of a recession.
And that makes a growing money supply good.
For them, it shows that an economy is growing, but in fact that may only be the case for a short period of time.
Moreover, it is also the way money becomes worthless.
Now, let’s look at the past two years until we see the pattern.
After about two years of the Fed’s plan to reduce their balance sheet we see M2 growing once again.
According to their reasoning, this should improve the economy.
Is the expansion of the M2 supply improving the economy?
Since the Fed started raising interest rates in 2022, you can see the velocity of the M2 Supply increase, below.
Velocity is the frequency at which people are using their money to buy goods and services. So, it is how often the money is being used to contribute to real things.
Now it is flatlining, but over time we see it following the same downward path.
The pattern is fairly consistent.
Overall, as the money supply increases, it becomes less and less effective in the real economy of goods and services.
Now you can see M2 Supply increasing, and velocity returning to negative percentage change overall.
So relationship seems to be correcting itself.
Whenever the Money Supply increases, it increases for a moment then the effectiveness of the new money wears out.
The whole process repeats itself from the mid-90s onward. That’s when the Clinton administration chose to start Big Bank bailouts.
This eventually happens until there is so much money no one really knows what effect it can have on the economy.
Then money dies.
On another note…
To make this hit home, here’s what to expect from the pattern in the next year.
The pattern is also the same when you look at changes in the Velocity of M2 versus CPI.
Every time there’s a recession the response has been to fill the economy with more money.
Then inflation rises dramatically as the new money enters the economy until inflation hits once again.
In 2008, the answer was to add more money, then start sucking it up out of the economy through Quantitative Easing(QE).
As you can see, printing more money, and engaging in QE has not improved the effectiveness of the US economy.
QE has only brought increases to inflation intervention after intervention…
When you compare the intervention of 2008 to 2020, the same pattern is playing out again, only on a larger scale.
This time the money will become worth less much faster.
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When the crisis hits, you will be told how ” unprecedented ” it all is , and who could’ve seen this coming …. ?
Then , you will be given instructions , orders , mandates and hoops to jump through so that we all can ” get back to normal .”
Take your digital money CBDC replacement scheme and shove it up your ass.
Yes.
I wonder if anyone said, back in 2020, that Covid was mostly an excuse to massively inflate the money supply while shutting down monetary velocity to prevent immediate inflation so that they could kick the can and prolong the fiat Ponzi scheme a little longer?
Beware, the can needs another kick.
I do remember someone opining that was the true reason for the lockdowns back then.
The Alarm Bells @ ZH© were sooo loud, as to be deafening.
And Then ?
“It’s a Global Pandemic !!!”
If you are currently riding the funny money road to devastation I suggest you get off soon and devise a better plan. I jumped off in March 1980 and for a simple wage earner feel I have done a good job for my heirs. No stocks, bonds or big bank accounts with funny bucks. It is A SUCKER GAME! Ending soon at the world you live in.
Unusual, Balbinus, to see a person openly talking about taking care of the heirs. I wonder, among the ‘simple wage earner’ group what proportion give that concept any thought. Certainly hard assets and metal, but I repeat myself, are more likely to be generational than fiat anything.
It causes more and more financial inequality. Taxes and debt will go up. IMO
By counterfeiting and careless credit.
MMT another idea so retarded it makes AOC look like a genius.