Real money supply declines sharply; another leading indicator for recession next year
Real money supply declines sharply; another leading indicator for recession next year
Real M1 declined -0.8% in April, and real M2 declined by -0.7%, following March declines of -1.0% for each:
These have been the sharpest monthly declines since 2005:
Real money supply is a long leading indicator, as shown in the below graph of both real M1 and real M2 going back over 60 years (shown in log scale to prevent inflation from showing earlier periods as mere squiggles):
Here is a close-up of the past 10 months showing both:
Real M1 is at a 9 month low. Real M2 is at a 12 month low.
Real M2 fell out of favor after failing to actually decline YoY prior to the 2001 and 2008 recessions, but a YoY% decline in real M1 and a real YoY% gain of M2 of less than 2.5% is nevertheless an excellent leading indicator for recession:
Again, the short term view shows that real M1 is only up 0.7% YoY (and if the trend continues, will be negative YoY in one month). Real M2 is already negative YoY:
Real money supply is now another negative leading indicator for recession next year.
fwiw, just three days ago, there was a post here that began..
“ just three days ago, there was a post here that began ‘Iam seeing posts from the usual DOOOMERS warning that a recession is imminent, if we’re not already in one. Typically – again, as per usual – they cite data that they never bothered with before, and won’t bother with again when it turns up, in support of their claims.’ ”
RJS:
1. We are not in a recession.
2. No recession is imminent.
3. I have been pretty clear that the risk is in 2023 – including in this article.
4. I have tracked real money supply every single week for years.
Before you insult me, check your own reading comprehension.
NewDeal
can you explain to the layman why we have inflation if the money supply is falling.
this is a question, not an argument. i don’t know a lot about inflation, but when i try to think about it, i don’t get the same answers the important people do.
NDD, fair enough, my comment was probably out of line…i probably took your anti-doomer rant too personally, and when this post came up it seemed like you were giving us mixed signals..
re: ‘I have tracked real money supply every single week for years.’ i was not aware of that; i have been getting your Bonddad posts on my feedreader for years and don’t recall that i ever saw a post on it…
RJS:
I always include the most recent money supply update in my Saturday “Weekly Indicators” post at Seeking Alpha.* I understand that you wouldn’t see it if you are not an SA subscriber.
*because it is one of the four “long leading indicators” identified by Prof. GeoffreyMoore, who founded ECRI.
NDD, i get your Bonddad posts on my Feedspot, so all i see about your weekly indicators is whatever you put up there…
i started following Bonddad on my Google Reader about the same time i started following Naked Capitalism, Calculated Risk, and Paul Krugman @NYT, before NYT put up a paywall…that would have been 2009, i believe…when Google shut down their reader, i imported my Google Reader files to Feedspot, which Anuj Agarwal had developed as a Google Reader replacement, and have used that since…