Money Makes the World Go Round

Until there is no more money

Gas makes a car go, right? Food makes the body run, right? Money makes the world economy go round, right? A lack of money in the economic engine does what? Right, the engine eventually will stall.

This chart from @nickgerli1 that tells the story on the present money supply. According to Mr. Nicks calculation, the M2 Money Supply Growth YoY has only gotten this low 4 times. Each time has created double digit unemployment. This week #JeromePowell and #ElizabethWarren had is out over rising rates and the effects it will have on unemployment. Mrs. Warrens position was that it will cause 2 million people to loose their jobs. Chairman Powell’s position was that this would only be an increase of 100bps to a 4.6% unemployment rate. BUT what this chart is telling us is that they could be both wrong. It could be much worse.

Markets and the Effect of Less Money in the Economic Engine

Those who are subscribers know my positions on the QQQ’s and my favorite high volatility stock. If M2 money supply continues to head lower, I’ll be right. What I expect to happen is M2 money supply will continue to head lower because the eight Fed Funds rate hikes have yet to fully intergrade into the financial system. If M2 is at a -2% now…I can only imagine what it will be once all eight are fully in effect.

The Yield Curve continues to give in to gravity. -107bps or -1.07%. 2 YR Treasury is at 5.05%. The Yield Curve going back as far as my charting system would go, has NEVER been this low. -1.07%….oh nothing to see here.

Yield Curve Monthly Chart

Conclusion

Its simple. If money is scarce, the value the of the US Dollar should eventually go up, along with Gold. Markets have had a good run YTD, but that maybe coming to an end. There is nothing wrong with taking profits and paying some tax’s on the gains. Risk manage your capital.