Sunday , 20 May 2018


Current Deceleration In Monetary Growth Portends Another Credit Crisis, Housing Bust & Economic Recession

With equity prices heading back toward historic highs after the January “correction” and housingbubble prick prices bubbling to an all time high in major markets, the suppression of the Total Money Supply growth rate, if it is sustained for the rest of the year, portends another credit crisis and housing bust, followed by an economic recession for the U.S. economy.

The original article has been edited here for length (…) and clarity ([ ]) by munKNEE.com – A Site For Sore Eyes & Inquisitive Minds – to provide a fast & easy read.

Jeffrey Peshut at RealForecasts.com has composed several very illuminating graphs based on the Rothbard-Salerno True Money Supply (TMS). In one graph Peshut shows the collapse of the growth rate of TMS beginning at the end of 2016, which was caused by the Fed beginning to raise the Fed funds target rate at the end of the preceding year.

What is of great interest is that the recent deceleration of monetary growth (the second red arrow) almost exactly matches in extent and rapidity the monetary deceleration (the first red arrow) that immediately preceded the financial crisis of 2007-2008.peshut1.png

peshut3.png

As Peshut’s graph above indicates the qualitative relationship between TMS growth, credit crisis, and recession has been remarkably clear since 1978 and, as such, the current suppression of the Total Money Supply growth rate, if it is sustained for the rest of the year, portends another credit crisis and housing bust, followed by an economic recession for the U.S. economy. (Of course, this empirical relationship should not surprise us, because it is nothing but an illustration of the Austrian theory of the business cycle.)

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