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The Money Tap Turns Off, Leaving The World In Short Supply

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http://www.telegraph.co.uk/money/main.jhtm...C-mostviewedbox

The lifeblood of countries' economies is draining away - with grim consequences for us all, writes Ambrose Evans-Pritchard

The money supply data from the US, Britain, and now Europe, has begun to flash warning signals of a potential crunch. Monetarists are increasingly worried that the entire economic system of the North Atlantic could tip into debt deflation over the next two years if the authorities misjudge the risk.

The key measures of US cash, checking accounts, and time deposits - M1 and M2 - have been contracting in real terms for several months. A dramatic slowdown in Britain's broader M4 aggregates is setting off alarm bells here.

Money data - a leading indicator - is telling a very different story from the daily headlines on inflation, now 4.1pc in the US, 3.7pc in Europe, and 3.3pc in Britain.

Paul Kasriel, chief economist at Northern Trust, says lending by US commercial banks contracted at an annual rate of 9.14pc in the 13 weeks to June 18, the most violent reversal since the data series began in 1973. M2 money fell at a rate of 0.37pc.

"The money supply is crumbling in the US. There was a very sharp lending contraction in the second quarter lending. If the Federal Reserve is forced to raise rates now to defend the dollar, it would be checkmate for the US economy," he said.

Leigh Skene from Lombard Street Research said the lending conditions in the US were now the worst since the Great Depression. "Credit liquidation has begun," he said.

The Fed's awful predicament does indeed have echoes of the early 1930s when the bank felt constrained to tighten into the Slump in order to halt bullion loss under the Gold Standard. Investors - notably foreigners - dictated a perverse policy. Over 4,000 US banks collapsed. This time a de facto "Oil Standard" is boxing in Ben Bernanke. Benign neglect of the dollar has started to backfire. It is pushing up crude, with multiple leverage.

The monetary picture is highly complex. The different measures - M1, M2, M3, M4 - have all given false signals in the past. Each tells a different tale, and monetarists fight like alley cats among themselves.

The Federal Reserve stopped paying much attention to the data a long time ago. It has abolished M3 altogether. The US economic consensus is New-Keynesian (dynamic stochastic general equilibrium model). Delving into the money entrails is derided as little better than soothsaying.

That attitude, retort monetarists, is the root cause of the credit bubble. The money supply almost always gives advance warning of big economic shifts. Those who track the data are now calling on central banks to move with extreme caution. If the rate-setters overreact to an inflation spike caused by oil and food - or confuse today's climate with the early 1970s - they may set off an ugly chain of events.

"The data is pretty worrying," said Paul Ashworth, US economist at Capital Economics. "US lending is shrinking dramatically in real terms, and we know from the Fed's survey that banks want to tighten further. People are clamouring for higher rates but we think deflation is now the biggest threat. The idea that the Fed should tighten with unemployment soaring is preposterous," he said. The jobless rate jumped from 5pc to 5.5pc in May.

In Britain, the Shadow Monetary Policy Committee - hosted by the Institute for Economic Affairs, and a refuge for UK monetarists - issued its own alert this week. The focus is on "adjusted M4", which covers loans to "private non-financial corporations" and may offer the best insight into the health of British business.

The growth rate has dropped from 16.1pc a year ago to minus 0.5pc in April. It is the suddenness of the decline that matters most. The data reeks of recession. Professor Patrick Minford from Cardiff Business School called for an immediate rate cut, arguing that the credit crunch is a more powerful and long-lasting force than the oil inflation.

Professor Tim Congdon from the London School of Economics said the UK was lurching from boom to bust. "Real money growth is virtually nil. The British economy is taking a thrashing and it is going to get worse. Corporate money balances have contracted 3pc over the last three months, which is double digits on an annualised basis. This is a serious squeeze for companies," he said.

If money supply growth is stopping or going into negative territory (I assume this means there is less money in the system or does negative not mean there is less money?) how on earth is the Bank of England going to get it's 5% back in interest?

Also if the money supply is rapidly shrinking how are we going to all pay owe mortgages and bills?

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http://www.telegraph.co.uk/money/main.jhtm...C-mostviewedbox

If money supply growth is stopping or going into negative territory (I assume this means there is less money in the system or does negative not mean there is less money?) how on earth is the Bank of England going to get it's 5% back in interest?

Also if the money supply is rapidly shrinking how are we going to all pay owe mortgages and bills?

Don't worry I have it on good authority we are in a hyperinflationary meltdown. The central banks are printing money using their money printing machines. So you needn't worry about a contracting money supply.

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Kirstie Allsop will address the nation at 9pm tonight

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http://www.telegraph.co.uk/money/main.jhtm...C-mostviewedbox

If money supply growth is stopping or going into negative territory (I assume this means there is less money in the system or does negative not mean there is less money?) how on earth is the Bank of England going to get it's 5% back in interest?

Also if the money supply is rapidly shrinking how are we going to all pay owe mortgages and bills?

I must admit to not fully understanding money supply(who does?) but M4 is not real money is it? It's broad money, M0 is real money, actual money. As most of the value of M4 was fictitious from the beginning it,s going negative should only have a bearing on silly financial instruments like derivatives and hedge funds.

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As most of the value of M4 was fictitious from the beginning it,s going negative should only have a bearing on silly financial instruments like derivatives and hedge funds.

And loaves of bread. Haven't you done your food shopping with credit cards or cheques? Or do you use cash only (real money...) to pay for food, rent, taxes, etc. ?

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I must admit to not fully understanding money supply(who does?) but M4 is not real money is it? It's broad money, M0 is real money, actual money. As most of the value of M4 was fictitious from the beginning it,s going negative should only have a bearing on silly financial instruments like derivatives and hedge funds.

Aye.

Credit deflation and monetary inflation.

Credit replaced by money is inflationary.

Edited to add - articel was written to put pressure on for a rate cut.

Edited by Injin

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Isn't alot of this house prices collapsing?

If all the monetary deflation manifests itself there.... :unsure:

I claim I have £100,000 and people believe me and act accordingly.

Something goes wrong and I am challenged to provide the £100,000. I can't, but luckily my uncle Merv has a printing press and he gives me £50,000

Money supply has gone up by £50,000, while the amount of money that people thought there was has gone down by £50,000/ People faith is shaken - they stop acting as if there is £100,000 but the real amount of money has gone up £50,000 and this is a stagflation.

Now slap ridiculous numbers into the mix and you have hyperinflationary depression.

Edited by Injin

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I claim I have £100,000 and people believe me and act accordingly.

Something goes wrong and I am challenged to provide the £100,000. I can't, but luckily my uncle Merv has a printing press and he gives me £50,000

Money supply has gone up by £50,000, while the amount of money that people thought there was has gone down by £50,000/ People faith is shaken - they stop acting as if there is £100,000 but the real amount of money has gone up £50,000 and this is a stagflation.

Now slap ridiculous numbers into the mix and you have hyperinflationary depression.

Nicely put.

How do you think gold will fair in a HD?

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How will they do that if they don't know you've got it?

Well last time (in the US for example) they outlawed owning it between 1933 and 1975.

You might as well buy crack cocaine or kiddie porn as a hedge.

Edited by Injin

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Credit replaced by money is inflationary.

Considering how much debt there is in the UK there really hasn't been much of this going on. Probably about enough to prop up our Zombie banks and no more - can't see this being enough to fit in with your scenario.

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Considering how much debt there is in the UK there really hasn't been much of this going on. Probably about enough to prop up our Zombie banks and no more - can't see this being enough to fit in with your scenario.

The plan is to bankrupt the public via credit deflation to the maximum extent possible and then print to bail out the banks and government.

This is all about saving the banking system.

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Well last time (in the US for example) they outlawed owning it between 1933 and 1975.

You might as well buy crack cocaine or kiddie porn as a hedge.

Outlawing something doesn't stop people from having or keeping it. Having it outlawed doesn't stop people from trading in it, all it means is it's gone underground the govt can't tax you on it.

If you get caught you go to jail/get it confiscated.

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Outlawing something doesn't stop people from having or keeping it. Having it outlawed doesn't stop people from trading in it, all it means is it's gone underground the govt can't tax you on it.

If you get caught you go to jail/get it confiscated.

Yep.

So you might as well buy drugs or kiddie porn as gold or silver.

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Well last time (in the US for example) they outlawed owning it between 1933 and 1975.

You might as well buy crack cocaine or kiddie porn as a hedge.

I'm aware the US banned gold in the past. Unlikely to happen again IMHO.

Even if it was banned in the UK, so what?

It's not exactly hard to sell it virtually anywhere in the world.

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Don't worry I have it on good authority we are in a hyperinflationary meltdown. The central banks are printing money using their money printing machines. So you needn't worry about a contracting money supply.

:P

Cue the subsequent obligatory hyperinflation posts. :rolleyes:

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The plan is to bankrupt the public via credit deflation to the maximum extent possible and then print to bail out the banks and government.

This is all about saving the banking system.

Banks do need creditworthy customers to continue their business.

The debts of the Govt are the debts of the people bailing out one bails out the other.

Sure some people will be bankrupted but not everyone.

This is no big conspiracy.

This is simply a bunch of politicians who can't administer the medicine to a post industrial economy helped by a bunch of economists who are conducting their own warped experiment which was always doomed to failure.

Right now nobody is in control of anything what happens from here on is only a consequence of past actions that can't be undone.

They all got it wrong-simple.

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Banks do need creditworthy customers to continue their business.

Commercial banks do. Central banks don't.

The debts of the Govt are the debts of the people bailing out one bails out the other.

For as long as the government can increase taxes, sure. of course increasing taxes reduces productivity and so we get both crash and debt default at the same time, plus a state failure. This is inevitable.

Sure some people will be bankrupted but not everyone.

They want to bankrupt as many as possible before they have to print to pay off their own debts.

This is no big conspiracy.

Yes, it is. All banking has been set up in the dark my conspirators.

This is simply a bunch of politicians who can't administer the medicine to a post industrial economy helped by a bunch of economists who are conducting their own warped experiment which was always doomed to failure.

Right now nobody is in control of anything what happens from here on is only a consequence of past actions that can't be undone.

They all got it wrong-simple.

I refer to the plan to get the banking system out of it's current hole. I agree theres a lot of foolishness and hubris that got the bankers here but the plan is definite and evil to get them out of it.

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The money supply M4 has increased tenfold since 1982, how did it happen?? And before you all say Gordon Brown, the majority of that rise happened between 1982 and 1997, it actually dipped very briefly when labour got in. A blip of some sort maybe, but then carried on rising at pretty much the same rate.

The rise has been remarkably consistent? Why? No government it seems has had any impact at all on it.

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  • 399 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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