Economic Bust Risks Increase as Money Supply in the U.S. Drops
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Recent data indicate that the US supply of currency significantly dropped in October. Represented by the “True Austrian Money Supply”, the money supply metric that is regarded to be the most preferred and broadest aggregate, the amount of money in America has fallen since September. The TMS2 announced that the year over year growth was a disappointing 7.7% October, which is a significant drop from September’s 8.3% rate.
Recent data indicate that the US supply of currency significantly dropped in October. Represented by the “True Austrian Money Supply”, the money supply metric that is regarded to be the most preferred and broadest aggregate, the amount of money in America has fallen since September. The TMS2 announced that the year over year growth was a disappointing 7.7% October, which is a significant drop from September’s 8.3% rate.
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A Big Drop
After having fallen approximately 880 basis points, or 53% from the ‘boom-boost monetary cycle of inflation’ high posted in November of 2009, the TMS2 rate is the lowest growth rate, year over year, since the 6.9% rate in November 2008. The results suggest that although America may not be willing to admit that it could be facing an imminent economic bust, one may well be on the horizon. What do you expect when you are $18 trillion in debt?
The decelerating trend in the monetary inflation rate is bringing United States citizens increasingly closer to a worrisome state for the economy. Experts suggest that both speculators and investors alike should remain cautious when considering the financial possibilities of the US.
The Growth Numbers in Comparison
Some people have commented that, at 7.7% in October of this year, the year over year rate of growth for TMS2 has not yet fallen as low as the 5% year over year rate that prompted the previous two busts for the country. However, it is important to consider that the latest installment of the Quantitative Easing project ushered in by the Federal Reserve’s asset purchase program is now over, with the last $15 billion worth of asset purchases finally ending.
During the previous twelve months, the quantitative easing project accounted for approximately 75% of the complete growth of the TMS2 numbers. Up to now, the other money creation engine for the economy, the banking system, has been helpful when it comes to offsetting the money creation void that the Federal Reserve vacated.
America is in Trouble
However, the United States bank is going to have to step it up a notch if they want to ward off a fast and dangerous deceleration regarding the rate of money creation overall. If the US banks cannot face up to the challenge, then the country could be staring into the face of an economic bust. This will also happen if President Obama does not stop spending billions of American dollars that this country does not have.
Market speculators and investors will also need to consider that the financial markets have seen the highest inflation in monetary terms during this cycle. The markets have seen more inflation this cycle than any other cycle throughout history, which makes them particularly vulnerable to deceleration.
