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RE: What Does the Beginning of a Recession Look Like?
any information being made available to the public like on this subject is great, because the more people are aware of the situation, the more pressure for positive change is being created. Good post !
In the graph I noticed that the St. Luis Adjusted Monetary Base Line has come down recently (from just over 4 tn in the middle of 2015 to just under 4 tn now). I guess this means that the monetary supply has been contracting again ? Does anyone know why this happened ? Is it significant to the overall picture ?
pretty interesting how the 5000 and monetary base tracked.
yes, mostly... but they start diverging since the beginning of this year ... why ?
My thoughts are that it corresponds with the small bump in interest rates (green line). Perception and Hysteria will keep the stock market charade running a bit longer but when interest rates increase, it causes borrowers to not borrow as much. Since the fractional reserve system and asset prices are supported by people borrowing more money it leads to a contraction of the fiat money supply. If you take it one step further and people stop borrowing all together and start pulling their cash out of the system it can cause a system wide meltdown. People bought assets at one price (supported by low interest rates) and when the interest rates increase can no longer afford to pay the amount the asset was purchased at, therefore the price they can pay goes down causing a decline in asset price (also known as deflation). Governments tend to try to combat deflation with inflation. Countless examples throughout history point to them inflating to the point of hyperinflation to try to maintain legitimacy. (Weimar Republic, Greenbacks, Ancient Rome, Zimbabwe, Venezuela etc....). In other words the government can guarantee people will always receive their social security checks. They just can't guarantee how many groceries their checks will purchase. When the price of common goods skyrockets, they will simply pass the blame on to the "greedy" farmers and merchants who are forced to jack up their prices to keep pace with inflation.