1) Contracting money supply + inflation is a nasty combination.
Because it means there are fewer dollars floating around in the system to pay for the higher prices. ❌💵
At some point the system "breaks" & a deflationary crash occurs.
— Nick Gerli (@nickgerli1) March 8, 2023
3) All it took was a -2% contraction in the money supply in 1921 to cause that deflationary depression.
And we're already at -2% contraction today in 2023.
Suggesting that the resilience of our economy and the current inflation might not be as strong as people think.
— Nick Gerli (@nickgerli1) March 8, 2023
5) But historical record is clear: Depressions/Deflation don't need a "linear" decrease in money supply to occur.
It just needs to be a little bit. 2-4% contraction YoY. And then problems occurs.
— Nick Gerli (@nickgerli1) March 8, 2023
7) Now the Fed is doing "Quantitative Tightening".
This QT is what's causing the money supply to contract in 2023.
Everyone's focused on rate hikes. But it's the QT/Money Supply they should be paying attention to.
— Nick Gerli (@nickgerli1) March 8, 2023
U.S. 🇺🇸
LAYOFFS pic.twitter.com/tVRPh3lDfZ— Win Smart, CFA (@WinfieldSmart) March 9, 2023
CONSTRUCTION 🚧
OPENINGS pic.twitter.com/TlR6mEle6x— Win Smart, CFA (@WinfieldSmart) March 9, 2023