Category Archives: Economics

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….

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…

The Short Version of the “Austrian” True Money Supply (TMS), as of 25 August 2014

The short version of the Austrian True Money Supply for the U.S., a measure of the money supply applied in this weekly report, decreased 0.55% on last week for the week ending 25 August 2014. At $10.1824 trillion, the money supply is now up 3.07% year to date. The 1-year growth rate dropped to 7.85%, down from 8.06% reported last week. It remains lower than the 8.30% long term average since 1980. The 5-year annualised growth rate continues to fall. The current growth rate of 10.54% remains well above the long term average of…

“Management of the Money Supply is More Sensible than Linking it to Gold…”

Right, I’m doing a bit of research on fractional reserve banking. So I pulled up my old “Macro-Economics” textbook from my days at college some 21 years ago. The 12th edition of the book, written by McConnell and Brue, was published in 1993. In a section titled “money as debt” they write: Most economists feel that management of the money supply is more sensible than linking it to gold or any other commodity whose supply might arbitrarily and capriciously change. A large increase in the nation’s gold stock as the…

One Key Reason Banks Will Continue to Merge and Its Implications

In the first quarter of 1984 there were 14,400 commercial banks in the U.S. As of the first quarter this year, the number had dropped to only 5,693. During the course of about 30 years, the number of banks in the U.S. hence declined by 8,707 or 60.5%. During the same period, total assets for all U.S. commercial banks increased from USD 2.0259 trillion to USD 14.4846 trillion, an increase of 615.0%. As a result, total assets for the average bank increased from USD 0.14 billion to 2.54 billion, or…

Combining Austrian Business Cycle Theory and Value Investing: This U.S. Stock Market Risk Indicator is at an All-Time High

Strict value investors focus on company fundamentals and price vs intrinsic value and pay little, or no, attention to macro economic data and developments. Though focusing on fundamentals, and buying at an attractive price, is of the greatest importance, even great value stocks will fall during larger stock market corrections (though perhaps by less). Keeping an eye on where we are in the financial cycle driven by central bank policy and fractional reserve banking is therefore also of great importance in my opinion. As I consider myself a value investor…