Liabridge's Economic Commentary

The Crank Report, Issue #1 (29 March 2015)

In this weeks issue: But who’s issuing the newly created money? Bank Capital: Déjà vu September 2008 The Austrian True Money Supply Weekly – 19 years of inflationary policies The U.S. Stock Market – Catch me if you can When the Monetary Crank Gets His Will – Take-off for Eurozone Monetary Base and Money Supply U.S. Economy: Say No to Thrift!   Download the pdf version.

Natural Economic Growth and The Role of Savings

Natural economic growth, or a rise in living standards, which we might also refer to as sustainable economic growth, comes about as a result of production, saving and investment. Savings can only accumulate if less is consumed (spent) than is produced (earned). Real saving therefore cannot be generated through inflating the money supply as both assets and liabilities increase simultaneously when it does. Taking up a loan and depositing it in a savings account therefore does not qualify as real saving.  The higher savings are in relation to consumption, which…

Welcome to A Very Dislocated 2015

The economy is pushed forward through people working, investing, spending and saving. For an economy to progress saving is key as without it there would be no spare resources set aside that can be channeled towards investments. And without investments, there can be no economic progress. There are however economic pundits who claim that a “shortage” of money is the real economic problem to be solved, and not a lack of saving. There can be few doubts that the Federal Reserve belongs in that particular camp championing easy money. Following…

The Short Version of the “Austrian” True Money Supply (TMS), as of 17 November 2014

This report is published weekly on EcPoFi. The short version of the Austrian True Money Supply for the U.S. increased 0.26% on last week for the week ending 17 November 2014. At $10.4593 trillion, a new high for the third consecutive week, the money supply is now up $576.0 billion, or 5.83%, year to date. The money supply has now increased $5.0370 trillion, or 92.89%, since Lehman Brothers filed for bankruptcy on 15 September 2008. The 1-year growth rate in the money supply of 7.29% for the week was unchanged from last week….

A Leading Economic Indicator and The Stock Market – Disconnection Taken To New Highs

Can it really be the case that the stock market is independent of economic developments? I admit, I’m starting to sound a bit like a broken record, but better safe than sorry. The truth is yes, the stock market can act independently for a while as low interest rates and an ever increasing money supply channels return-starved funds to the stock market casino away from the more risk averse options.    But the reality of the real economy hits Wall Street with a big hammer from time to time, knocking…

Paying Lip Service to “Too Big To Fail”

As bank assets continue to hit new highs on a quarterly basis, fueled by money supply growth and the various QE programs, the number of banks continues to slide. Compared to Q2 2008, there are today (as of Q3 2014) 1,501, or 21.0%, fewer banks operating in the U.S. During the same period, total assets for all banks operating in the U.S. surged by some $3.8 trillion to $14.8 trillion, an increase of 34.7%. As a result, total assets for each bank has increased 70.6% on average during the Q2…

The U.S. Stock Market Risk Indicator, October 2014

The U.S. stock market risk indicator climbed 2.1% during October to reach the highest level of risk ever recorded based on data starting in 1986. The index currently signals the probability of poor future stock market returns have never been higher during the period covered. Following a choppy slide during the first couple of weeks of October, the U.S. stock market turned around and ended the month with a gain of just under 2.3% taking the S&P 500 to a new record high. Higher stock prices leading to a yet higher…

The U.S. Stock Market is Running Out of Monetary Rocket Fuel

On Wednesday the Federal Reserve announced it would taper its asset purchases by another $10 billion starting next month. Fed monthly asset purchases will by then have been reduced from $85 billion a month in December last year to “just” $15 billion from October, a reduction of 82.4%. This Fed taper is greatly reducing the overall monetary stimuli. The  U.S. stock market is now therefore rapidly running out of the monetary rocket fuel that contributed to its rather smooth, and ever continuing, surge since March 2009. Adding the increases in…