The Fed is in deep trouble, if this analysis using the money supply is on target.
The Federal Reserve has long since given up on the idea that changes in the money supply are a main driver for inflation, though monetarism still has its adherents, in the U.S. and globally.
And... The Federal Reserve has long since given up on the idea that changes in the money supply are a main driver for inflation, though monetarism still has its adherents, in the U.S. and globally. And one data point the firm cites is particularly jarring. It’s called other deposit liabilities, which are all the deposits at a bank minus term deposits. The series is a good proxy for the M2 measure of money supply, representing about 80% of the total. According to HIMCo, the 0.4% annualized growth over the last 26 weeks in other deposit liabilities is the slowest since the Great Depression.
“By [Milton] Friedman’s evidence, the likelihood for a successful outcome of a soft-landing for the Fed and thus the United States is low,” says HIMCo in its second-quarter update. Velocity, it finds, also is slowing.
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