Why the Falling Money Supply Hasn't Yet Created Big Job Losses \ stacker news ~econ

Why the Falling Money Supply Hasn't Yet Created Big Job Losses

578 sats \ 15 comments \ @Undisciplined 18 Dec 2023 econ

It's been a long time since the money supply fell as dramatically as it currently is. If we can step back from worrying about the problems deflation will create, this will be a very interesting time period to witness firsthand.

Why the Falling Money Supply Hasn't Yet Created Big Job Losses By Daniel Lacalle "The reason why the economy is not showing significant negative effects from recent drops in the money supply is because the amount of liquidity injected in 2020–21 was so huge that there is a long lag effect as savings are consumed."

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325 sats \ 3 replies \ @grayruby 18 Dec 2023

I definitely misjudged how long this stuff takes to filter through the broader economy. Just as people who think a soft landing is being achieved maybe are also discounting the amount of time it will take for 18 months of hikes to filter through the economy. People don't typically change their lifestyle until forced to.

110 sats \ 2 replies \ @Undisciplined OP 18 Dec 2023

I was a little surprised when I first saw that the money supply was shrinking, because CPI was still well above the target level. It does seem like the landing will be pretty hard when prices finally catch up to the money supply.

304 sats \ 1 reply \ @grayruby 18 Dec 2023

Do you think eurodollar market could be filling some of the money supply void of domestic dollars?

100 sats \ 0 replies \ @Undisciplined OP 18 Dec 2023

That's well beyond my area of expertise. We might have to loop @TomK in for that question.

304 sats \ 5 replies \ @shado_op 18 Dec 2023

So the monetary bubble is so big, the economy is yet to deflate from this high. And most in the West are simply unaware the cumulative impact of inflation has caused the value of the dollar, pound, euro etc to have fallen by about a quarter in the last 3/4 yrs alone. Because the massive injection of central bank liquidity masked it. Makes sense!

25 sats \ 3 replies \ @Undisciplined OP 18 Dec 2023

I didn't anticipate the lag (I didn't think about it one way or another), but there are substantial lags between printing money and price inflation, so there should be lags between a shrinking money supply and price deflation.

277 sats \ 2 replies \ @TNStacker 2 Jan

Study Econ. There is always a lag. They are very cunning in their communications, because being clear can bring undesirable effects.

20 sats \ 1 reply \ @Undisciplined OP 2 Jan

Study Econ

It's a big subject and I can't pay attention to everything all the time. I'm not really a macro guy and the monetary deflation of the past year is historically unprecedented, so I don't know if more studying would have helped.

I have been thinking about macro questions more since finding Stacker News, so perhaps my instincts on the subject will improve.

277 sats \ 0 replies \ @TNStacker 2 Jan

Already have, I'd say.

0 sats \ 0 replies \ @TNStacker 2 Jan

Makes sense

Yes, indeed

277 sats \ 2 replies \ @TNStacker 2 Jan

The consequences of the decisions governments made during Covid are still coming. It will take a decade from 2019 to play out. We may see much more military conflict first.

10 sats \ 1 reply \ @Undisciplined OP 2 Jan

They blew up a bubble on top of an already pretty big bubble. We could be in for a big correction, especially if congress isn't feeling very cooperative. It's probably a good time to live somewhere with a productive real economy and relatively lax regulations.

I wish you were wrong about the likelihood of military escalation, but I also think that's likely.

0 sats \ 0 replies \ @TNStacker 2 Jan

I hope I am wrong.

0 sats \ 0 replies \ @niftynei 18 Dec 2023

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0 sats \ 0 replies \ @Undisciplined OP 18 Dec 2023

I'll head off the bitcoin-centric criticism of this article by noting here that I don't understand the argument made by the author for gold over bitcoin in a deflationary environment.

At least Bitcoin was mentioned.