NSA monthly, M1 crested (maximum upward displacement in Alan Greenspan’s transverse business cycle) on 12/2004 @ $1,401.5b. It didn't exceed that # until 4/2008 @ $1,406.6b. But that is stock, and not flow.
Note: during the Great Depression the money stock fell for c. 4 years (from 1929-1933). Prior to the GFC the money stock also fell for c. 4 years. That is, the Federal Reserve, when Ben Bernanke was at its helm, conducted the most contractionary money policy since the Great Depression precipitating the Great Financial Crisis.
Governor Ben S. Bernanke “On Milton Friedman's Ninetieth Birthday” At the Conference to Honor Milton Friedman, University of Chicago, Chicago, Illinois, Nov. 8, 2002:
“…I would like to say to Milton (Friedman) and Anna (Swartz): Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”
I say déjà vu to that.
See: Dr. Richard G. Anderson (world’s leading guru on bank reserves) – “Some Tables of Historical U.S. Currency and Monetary Aggregates Data”
https://files.stlouisfed.org/files/htdocs/wp/2003/2003-006.pdf
A STOCK variable is measured at a particular point in time (viz., intermezzo), and represents a quantity prevailing at that point in time (say, Dec. 31, 2004), which may have accumulated over a prior time frame. A FLOW variable is measured over an interval of time." – Wikipedia
Economic variables (the same or different ones), are measured by using RoC’s - and not absolute figures (absolute vs. relative change)
The absolute change between the 1st two #s [both M1 quantities] = $5.1b or zilch!
The relative change between the 1st two #s [both M1 quantities] = 0.003639% - both zilch!
However, no money stock figure standing alone is adequate as a “guide post” for monetary policy. M1’s utilization rate is determined by its turnover (money velocity), or how many times M1 components, our means-of-payment money supply, exchange counterparties within the payment’s system, or M*Vt [marque: “money flows” propagation]
The rate of change - RoC - is the rapidity at which a variable changes over a specified time frame. “RoC is often used when speaking about momentum, and it can generally be expressed as a ratio between a change [ Δ, first derivative f’], in one variable relative to a corresponding change in another.” Investopedia.
Acceleration or deceleration in money velocity, Vt, [second derivative, ΔΔ, f” ] is equal to Vt’s RoC relative to a specified time frame.
This calculation is important, ceteris paribus. For example, in current environment, inflation is now falling faster, second derivative f”, than R-gDp (different variables), which, other things equal, is eventually bullish for both bonds and stocks, figuratively raising Nassim Taleb’s quixotic BARBell strategy based on: “randomness, probability, & uncertainty”).
As William Barnett (Divisia Monetary Aggregates) recommended: the Fed should establish a "Bureau of Financial Statistics". The data the Fed aggregates is unusable.
In other words, the data I use is non-conforming. There are limitations on all analyses based upon broad statistical aggregates, namely, data cannot be compiled accurately or in a manner which conforms to rigid theoretical concepts, and the entire approach tends to be ex post and static.
Neither the CPI nor PCE (“price illusion” measures), captured the speculative foray and collapse that took place in real-estate assets. The value of money to any individual is probably not represented by any price index. Instead, agencies which collect and compile price data create specialized types of indexes, aka, the Case-Shiller Home Price Index.
Nevertheless, our concern is not with how the value of money can be measured, if at all, but rather the relationship of money and money flows to the level and co-movement of prices.
As Nobel Laureate Dr. Milton Friedman (of an engaging persona and skilled statistician, but lousy economist), said: "The only relevant test of the validity of a hypothesis is comparison of prediction with experience."
Scientific method is "a method or procedure…consisting in systematic observation, measurement, and experiment, and the formulation, testing, and modification of hypotheses" - Wikipedia
The doomsday naysayers are in disbelief:
https://www.zerohedge.com/news/2018-03-10/stockman-everything-bubble-just-waiting-pin
“neither central bankers nor Wall Street ever see these new style recessions coming because, in fact, they can't be detected from even an astute reading of the macro-economic tea-leaves” – David Stockman (a budget financier).
You can thank the Ph.Ds. at the BOG for discontinuing the G.6 release (debit & demand deposit turnover). Bank debits reflect both new & existing residential & commercial real-estate sales/purchases. As such the housing boom/bust would have stuck out like a sore thumb. Don't be fooled. This isn't rocket science. All real-estate transactions are cleared thru the payment’s system. The NBFIs are the DFI’s customers.
This is how past boom/busts in real-estate were depicted:
You can thank (1) William G. Bretz “Junction Recognition in the Stock Market” Vantage Press, 1972 (and James Grant “Interest Rate Observer” (for giving me his phone #). And our forefathers:
And we knew this already:
In 1931 a commission was established on Member Bank Reserve Requirements. The commission completed their recommendations after a 7 year inquiry on Feb. 5, 1938. The study was entitled "Member Bank Reserve Requirements -- Analysis of Committee Proposal"
It's 2nd proposal: "Requirements against debits to deposits"
After a 45 year hiatus, this research paper was "declassified" on March 23, 1983. By the time this paper was "declassified", Nobel Laureate Dr. Milton Friedman had declared RRs to be a "tax" [sic].
Inflation works thru price dispersion. Price dispersion's evident in asset substitution (consumption or investment decisions). Asset substitution depends upon economic staccato, or Gresham’s law: a statement of the “principle of substitution” as applied to money: that a commodity (or service) will be devoted to those uses which are the most profitable. I.e., the bad drives out the good - is apropos.
The inflation indices represent a relative fixed basket of goods and services. The indices are not necessarily "representative" of preferential spending and investing decisions, nor do they capture in real-time, shifts in consumption or investment (esp. speculative swings in outlays).
So if the Fed targets the so-called price-level, e.g., the PCE or CPI, the monetary authorities will miss price dispersion / distribution and asset substitution (mal-investment: the mal-distribution and mis-allocation of available savings, or eating peanut butter instead of steak).
It's funny that the Fed touted the wealth effect on the upside (“The wealth effect is the change in spending that accompanies a change in perceived wealth”), but not the bankruptcy effect on the downside (“After selling the assets, the debts are cleared”…and the entity is “subjected to a number of financial restrictions”).
This is how Bankrupt-u-Bernanke directly caused the GFC entirely by himself and bankrupt the Federal Government:
2006 jan ,,,,,,, 45496 ,,,,,,, 0.04
,,,,, feb ,,,,,,, 43084 ,,,,,,, 0.01
,,,,, mar ,,,,,,, 41242 ,,,,,,, -0.02
,,,,, apr ,,,,,,, 42920 ,,,,,,, -0.03
,,,,, may ,,,,,,, 43648 ,,,,,,, -0.02
,,,,, jun ,,,,,,, 43278 ,,,,,,, -0.01
,,,,, jul ,,,,,,, 43328 ,,,,,,, -0.03
,,,,, aug ,,,,,,, 41162 ,,,,,,, -0.06
,,,,, sep ,,,,,,, 40865 ,,,,,,, -0.08
,,,,, oct ,,,,,,, 40088 ,,,,,,, -0.08
,,,,, nov ,,,,,,, 40543 ,,,,,,, -0.06
,,,,, dec ,,,,,,, 41461 ,,,,,,, -0.07
2007 jan ,,,,,,, 43113 ,,,,,,, -0.11
,,,,, feb ,,,,,,, 41214 ,,,,,,, -0.09
,,,,, mar ,,,,,,, 39159 ,,,,,,, -0.11
,,,,, apr ,,,,,,, 41072 ,,,,,,, -0.09
,,,,, may ,,,,,,, 42699 ,,,,,,, -0.05
,,,,, jun ,,,,,,, 42034 ,,,,,,, -0.05
,,,,, jul ,,,,,,, 41164 ,,,,,,, -0.08
,,,,, aug ,,,,,,, 39906 ,,,,,,, -0.07
,,,,, sep ,,,,,,, 40460 ,,,,,,, -0.07
,,,,, oct ,,,,,,, 40161 ,,,,,,, -0.04
,,,,, nov ,,,,,,, 40331 ,,,,,,, -0.04
,,,,, dec ,,,,,,, 41048 ,,,,,,, -0.04
2008 jan ,,,,,,, 42398 ,,,,,,, -0.07
,,,,, feb ,,,,,,, 41070 ,,,,,,, -0.05
,,,,, mar ,,,,,,, 39731 ,,,,,,, -0.04
,,,,, apr ,,,,,,, 41642 ,,,,,,, -0.03
,,,,, may ,,,,,,, 43062 ,,,,,,, -0.01
,,,,, jun ,,,,,,, 41616 ,,,,,,, -0.04
,,,,, jul ,,,,,,, 42083 ,,,,,,, -0.03
,,,,, aug ,,,,,,, 42055 ,,,,,,, 0.02
,,,,, sep ,,,,,,, 42456 ,,,,,,, 0.04
,,,,, oct ,,,,,,, 46930 ,,,,,,, 0.17
,,,,, nov ,,,,,,, 50363 ,,,,,,, 0.24
,,,,, dec ,,,,,,, 53723 ,,,,,,, 0.30
I.e., Bankrupt-u-Bernanke collapsed American Yale Professor Irving Fisher’s price-level for 29 contiguous months. I.e., contrary to Nobel Laureate Dr. Milton Friedman, the distributed lag effect of money flows are not “long and variable” as he pontificated (1969, “The Optimum Quantity of Money”, Macmillan). The distributive lag effect of monetary flows, volume X’s velocity, have been mathematical constants for over 100 years (my own research).
So what prices do you think were most impacted? It was long-lived property assets that were most impacted by Bankrupt-u-Bernanke’s contractionary money policy.
But that’s not what caused the GFC. The GFC was caused by a collapse in real-output due to a surgically sharp decline in money flows, M*Vt, the proxy for real-output (another mathematical constant):
POSTED: Dec 13 2007 06:55 PM |
The Commerce Department said retail sales in Oct 2007 increased by 1.2% over Oct 2006, & up a huge 6.3% from Nov 2006.
10/1/2007,,,,,,,-0.47,... -0.22 * temporary bottom
11/1/2007,,,,,,, 0.14,,,,,,, -0.18
12/1/2007,,,,,,, 0.44,,,,,,,-0.23
1/1/2008,,,,,,, 0.59,,,,,,, 0.06
2/1/2008,,,,,,, 0.45,,,,,,, 0.10
3/1/2008,,,,,,, 0.06,,,,,,, 0.04
4/1/2008,,,,,,, 0.04,,,,,,, 0.02
5/1/2008,,,,,,, 0.09,,,,,,, 0.04
6/1/2008,,,,,,, 0.20,,,,,,, 0.05
7/1/2008,,,,,,, 0.32,,,,,,, 0.10
8/1/2008,,,,,,, 0.15,,,,,,, 0.05
9/1/2008,,,,,,, 0.00,,,,,,, 0.13
10/1/2008,,,,,,, -0.20,,,,,,, 0.10 * possible recession
11/1/2008,,,,,,, -0.10,,,,,,, 0.00 * possible recession
12/1/2008,,,,,,, 0.10,,,,,,, -0.06 * possible recession
Trajectory as predicted.
Why did Bankrupt-u-Bernanke misjudge the economy? It is because Bankrupt-u-Bernanke thinks that money is neutral, and not robust.
“Neutrality of money is the idea that a change in the stock of money affects only nominal variables in the economy such as prices, wages, and exchange rates, with no effect on real variables, like employment, real GDP, and real consumption.” – Wikipedia
Ben S. Bernanke & Ilian Mihov: “The Liquidity Effect and Long-Run Neutrality" to wit: “The first, the so-called liquidity effect (LE), asserts that in the short run, changes in the money supply induce changes in short-term nominal interest rates of the opposite sign. The second proposition, the long-run neutrality of money (LRN), states that changes it the money supply do not have significant effects on real quantities such as output, employment, real interest rates, and real balances in the long run.”
This is exactly how Bankrupt U Bernanke directly and solely caused the Great-Recession, real-estate’s “pro rata share” of the Yale Professor Irving Fisher’s price-level.
Neither financial transactions nor “animal spirits” are random:
American, Yale Professor Irving Fisher – 1920 2nd edition: “The Purchasing Power of Money”:
“If the principles here advocated are correct, the purchasing power of money — or its reciprocal, the level of prices — depends exclusively on five definite factors:
(1)the volume of money in circulation;
(2) its velocity of circulation;
(3) the volume of bank deposits subject to check;
(4) its velocity; and
(5) the volume of trade.
“Each of these five magnitudes is extremely definite, and their relation to the purchasing power of money is definitely expressed by an “equation of exchange.”
“In my opinion, the branch of economics which treats of these five regulators of purchasing power ought to be recognized and ultimately will be recognized as an EXACT SCIENCE, capable of precise formulation, demonstration, and statistical verification.”
There are 6 seasonal, endogenous, economic inflection points each year. These seasonal factors are pre-determined by the FRB-NY’s "trading desk" operations, executing the FOMC's monetary policy directives (in the present case just reserve "smoothing" and “draining” operations, the oscillating inflows and outflows, the making and or receiving of interbank and correspondent bank payments by and large using their “free" excess reserve balances).
Every year, the seasonal factor's map (economic time series’ cyclical trend), or scientific proof, is demonstrated by the product of money flows, our means-of-payment money X’s its transaction’s velocity of circulation (the scientific method).
Monetary flows (volume X’s velocity) measures money flow’s impact on production, prices, and the economy (as flows are driven by payments: “bank debits”). It is an economic indicator (not necessarily an equity barometer). Rates-of-change Δ, in M*Vt = RoC’s Δ in AD, aggregate monetary purchasing power. Thus M*Vt serves as a “guide post” for N-gDp trajectories.
N-gDp is determined by the volume of goods & services coming on the market relative to the actual, transactions, flow of money. RoC's in R-gDp serves as a close proxy to RoC's in total physical transactions, T, that finance both goods and services. Then RoC's in P, represents the price level, or various RoC's in a group of prices and indices.
Monetary flows’ propagation, are a mathematically robust sequence of numbers (sigma Σ), neither neutral nor opaque, which pre-determine macro-economic momentum (the → “arrow of time” or "directionally sensitive time-frequency de-compositions").
For short-term money flows, the proxy for real-output, R-gDp, it's the rate of accumulation, a posteriori, that adds incrementally and immediately to its running total.
Its economic impact is defined by its rate-of-change, Δ "change in". The RoC, is the pace at which a variable changes, Δ, over that specific lag's established periodicity.
And Alfred Marshall's cash-balances approach (viz., a schedule of the amounts of money that will be offered at given levels of "P"), viz., where at times "K" is the reciprocal of Vt, or “K” has the dimension of a “storage period” and "bridges the gaps of transition periods" in Yale Professor Irving Fisher’s model.
As Nobel Laureate Dr. Ken Arrow says: “all analysis is a model”.
- Michel de Nostredame (I cracked the code in July 1979).
Dr. Leland J. Prichard: "You may have a predictive device no body has hit on yet"
This "device" is worth trillions of dollars. I should be awarded the Nobel Prize in economics.
Maybe Vladimir Vladimirovich Putin is smart enough to use it (as all my traffic is from Russia)
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