Pavel Ryabov: USA on the verge of great monetary transformation

Or what is the inflation hell.

In any developed country since the Weimar Republic monetary momentum for 10 weeks was less than 15%. In the postwar world? None of the advanced (by current standards) country … until now in the United States. 4 may 2020, the change in the money supply over the last 10 weeks in the US is 15%

The annual change of monetary aggregate M2 is 22% In U.S. history have been periods of high rates of monetary growth. For example, the second half of 1971 to 2nd quarter 1972, the growth rate reached 13.5% per annum, similar growth rates were in mid-1976, 1982-1983 growth reached 12.5% and weekly short-term pulses of up to 14%, but 22% had never been.

March 2020, the increase becomes exponential form. Almost 2.5 trillion over a couple of months. Early increment of 2.5 trillion US required at least 3 years, now 2 months!

The fed's balance sheet grew by 2.8 trillion over 2 months, reaching $ 7 trillion! It is important to note that before the fed's balance sheet never reflected, not mirrored in the money supply. The monetary base? Of course, but not the money supply.

All the rounds of QE for past periods were sterilized using absorbation mechanisms of the US financial system, in other words, money circulates in a closed office, not breaking into the real economy. All this had virtually no price pressure in the economy, with the exception of periods of aggressive rathirani comoditis. Distributed in time a small portion of QE from 2008-2014 led to the speeding up of the stock markets, inflating bubbles on the and closing the dropdown of the cash flows for financing the budget deficit of the United States.

this is different. They started to peel on the real sector from all trunks.

I have already noted that in the developed countries was nothing like this in the postwar world, so there is no sense to give comparable statistics. In developing happened, but rarely and selectively. For 9-week momentum den.mass (for the United States is 14%) for developing countries after 1998, the scenario is the following. China (11% in January 2000 and not more than 7-8% of short-term pulses in 2009), India (13% in January 2008), Brazil (6.5% in December 2003 and 5.9% in October 2007), Russia (13% in December 2006, December 2007 and January of 2015 at the moment due to exchange rate revaluation wide den.mass), Turkey (16% in December 2005 and 15.6% in August 2008), Mexico (7.3% in November 2009), Argentina (17% in July 2018), South Africa (9% in March 2006), Thailand (4.4% in December 2008), Indonesia (7.7% in October 2008 and 7.5% in December 2007), Philippines (10% in July 2013).

Higher than in the US of the largest developing countries, the money supply grew only in Argentina and Turkey over the past 25 years. In Turkey this was offset by a sharp (up to 7%) reduction in the money supply in the next 6-9 months after such growth, while in Argentina it led to higher inflation by 50-70%. The current momentum in the U.S. is superior to all that happened in Russia in the periods of high growth rates den.mass (2000-2007). Absolutely incredible!

The recent inflation report, which showed deflationary trends – this is the strong delusion of the decade.

The deflationary tendencies in the disabled sector distribution of the money supply – those segments, the purchase of which has been blocked or hampered. At all desire it was impossible to spend money in the industry of culture, sports and entertainment, tourism, it is impossible or difficult to buy clothes, household appliances, cars, to make beauty and massage treatments and so on. Yes, simply because most of the shops were closed.

But the food strongest inflationary impulse to the ' 80s

The rate of saving from current income has reached 13.1% in March (for April to exceed 20%) and this will be the highest rate for the entire period of available statistics, 1959

This is not primarily with the change of behavioral patterns/patterns of consumption, and that the way distribution of income was closed.

There is a big difference in 2020 from the great depression of the early 30s or even the crisis of 2008-2010. Then the crisis was accompanied by deflationary tendencies because of the loss of sources of income for the population. Prices fell because less ability of the population to purchase goods and services in excess demand (especially in 2008-2009). Not only wages then fell, but business income, subsidies, grants (for the first wave of the crisis in the 30s), property income and so on.

Now the income from property did not fall, and even grow through the stock market and real estate, salaries also show an increase among those who retain jobs, and grants and donations so monstrous that cover the entire shortfall in income have lost their jobs. 8 out of 10 of all those who have lost their jobs receive benefits are so large that fully or nearly offset the entire shortfall in revenue on the same place of work. In these circumstances, only a complete idiot to go back to work!

So, what we're getting?

the Strongest in the history of the U.S. and world money growth on the background of the centenary of the rate of household savings. And all this with the powerful pent-up demand due to the protracted period of closure.

Is stopped or partially derived production, the recovery of which can go of the month, ie a limited supply of goods.

Obankrocheny or partially destroyed by the service sector, the reconstruction of which will take months and years, which also limits the potential supply.

To a third of the economy destroyed, and the subsidies are so large that exclude the unemployed return back. There will be a battle not for work, and for unemployment! Steep the one who is on the Dole – all so want! The result is a sharp reduction in the supply of goods and services (to a third) while maintaining or even increased purchasing power.

The broken capitalist spirit and the mechanism of debt with a corrupted culture. This will have a fundamental long-term effect on reducing productivity. In the former version of capitalism was the struggle for efficiency in the conditions of fierce competition. Now, the United States abolished capitalism and moral hazard, giving the cache an unlimited scale on demand to anyone. Now any risk of bankruptcy and the inefficiency of the close in unlimited subsidies to businesses and households.

Thus, beyond the canopy cache, pent-up demand, disabling the economy (and as a consequence the supply of goods and services), the strongest demotivators to work and competition through grants. In the second half after the greatest impetus for money supply for 100 years will be comparable to the momentum of inflation, and so strong that it can surpass all that was ever seen before.

But that's another story. Inflation will inevitably spread not only debt market of the USA (treasuries in the first place), but the stock markets as major purchases major dealers and funds were within the pyramid REPO under pledge of treasuries and other debt securities. The financial markets of the United States for the destruction will go all other global markets. All of this will be superimposed on the panic of the monetary authorities and the pumping of liquidity from the markets, leading to the final test shot. February-March 2020 this is not even the panic over what may be in the near future.

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