Increasing Money Supply = Deflation ?
The Afternoon Audit
Monday | 6.01.2020
How is it Already June?
Catch Up Quick
Oil prices rose by nearly 90% in May
China orders state-run agricultural companies to pause purchases of certain American farm goods
Astronauts Behnken and Hurley successfully docked to the ISS yesterday morning, completing a successful mission of the behalf of SpaceX
State Governors blast President Trump's rhetoric on George Floyd protests, saying it is "dangerous" and "making things worse"
BET founder Robert Johnson calls for $14 trillion of reparations for slavery
My Monday Opinions
The protests and rioting in connection with the death of George Floyd has been exacerbated by pandemic-related organizational distrust, psychological unrest, 24% unemployment, and pent-up emotions resulting from months of quarantine
Simply between the chaos induced by the pandemic and the protests across America, President Trump’s chance of re-election, regardless of your view on his involvement in these developments, has objectively eroded
Morgan Stanley is planning to bring New York traders back to office this month— trading is quietly a huge victim of stay at home guidelines, the proximity to NYSE databases and the high-end systems in place at trading headquarters' are highly favorable in minimizing trade execution time, which is very important for institutional equities trading
Many restrictions imposed against evictions during the pandemic were highly temporary, with many set to expire in some U.S states very soon— with unemployment rising quickly, an avalanche of evictions across the nation could be on the horizon
Thought of the Day
Despite unprecedented levels of recent money supply expansion on behalf of the Federal Reserve, inflation is decreasing— how is this possible?
Deutsche Bank chief economist Torsten Sløk points out, coins and bills in circulation currently make up only 10% of the money supply
The majority of the money supply is now used by the Fed for its balance sheet and in the banking sector to purchase financial assets
As such, the velocity of money has slowed dramatically
Sløk states that "an increase in money supply relative to GDP is having a negative impact on inflation"
In summary— given an increase in money supply, if money goes into asset transactions rather than GDP transactions it will not be inflationary (magic!)