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Saturday, March 03, 2018

A Great Big Warning Sign

Jerome Powell came out pretty hawkish in his public debut this week (albeit with some flip-flopping this morning). The new Federal Reserve chairman said he sees little risk of recession and reaffirmed plans to continue tightening the money supply through interest rate increases and quantitative tightening.

"My personal outlook for the economy has strengthened since December. I don’t see [the recession risks] as at all high at the moment.”

But there are signals that Powell’s optimism is unwarranted and that the monetary blanket knitted together with nearly a decade of easy money may be about to unravel. In fact, the deceleration in the growth of the money supply orchestrated by the Fed matches the trend just prior to the 2008 crash.

Mises Institute academic vice president, and Pace University professor of economics Joseph Salerno explains in an article originally published on the Mises Wire.

Jeffrey Peshut at has composed several very illuminating graphs based on the Rothbard-Salerno True Money Supply (TMS). In one graph Peshut shows the collapse of the growth rate of TMS beginning at the end of 2016, which was caused by the Fed beginning to raise the fed funds target rate at the end of the preceding year. What is of great interest is that the recent deceleration of monetary growth (the second red arrow) almost exactly matches in extent and rapidity the monetary deceleration (the first red arrow) that immediately preceded the financial crisis of 2007-2008.



Anonymous said...

This author has covered himself regardless of what happens.

Anonymous said...

Mr. Powell will do and say exactly what his bosses at he privately owned Federal Reserve Bank tell him to do and say. At this moment in time, they do not want him to tell us about the coming wealth destruction which will be caused by the "tightening" of fiat currency.

Question: WHO will buy the US Bonds when the Fed stops?

Who on earth would want them?

Anonymous said...

Why hasn't anyone considered returning the dollar to the Gold Standard?

Anonymous said...

8:44 ~ see "Executive Order 11110"...

Anonymous said...

Because the US has no gold.
That is why they cannot allow an audit.

They sold the gold in an effort to suppress its price on COMEX.
Now they sell naked short positions to keep the price of gold down.

Ditto for silver.