M2 Money Supply, Deflation, and Bail-Ins
"Depositor haircuts" and other relevant economic literacy.
Related in series:
And on and on and on.
What if I told you that the Federal Reserve started ‘counting’ the money supply differently after May, 2020 as well? Yep. That’s what they did. Read it here (old) and here (new).
Couple months ago, that bit about the changes in money supply calculations were absentmindedly put into the first article listed above. No idea about what, if any, ramifications that will have going forward. Perhaps Ed Dowd can put some content together for people on what impact, if any, this change will have on things going forward.
At the time, M2 was still trending up, but not as much as it was in the several month period preceding November, 2022. It’s kind of similar to how they gaslight you and tell you “inflation is coming down” — but what they really mean is, the “rate of increase in inflation is slowing.” Those are two very, very different concepts.
The rate was slowing…and now it’s gone negative. And now? Now, M2 is actually starting to contract. This means the money supply is shrinking. Who knows what will happen as a result. Maybe — finally — getting inflation to invert (called deflation) — but at someones expense.
M2 Money Supply going negative year over year means that the velocity of money is going down, hard.
Behind the so-called “velocity of money” is, as with the mathematics behind the laws of physics, a complex set of mathematical calculations and equations that more or less wind up with the ‘system’ performing in relatively and fundamentally predictable ways. So fundamentally predictable that ‘economists’ — like meteorologists (another B.S. profession) — can make ‘forecasts’ about it. Somehow, they’re always wrong, but they get to keep their jobs — and they get raises.
This is how & why Corporate Disinformation Outlets (CDOs) have been ‘telegraphing’ to all (who care to look) that a recession is coming due to central bank policy. It’s a feature of the central bank cartel that they, and they alone, can ‘heat’ and ‘cool’ the entire economy. In other words, they possess a monopoly (or a cartel) on all the other monopolies (or cartels) that now make up the overwhelming majority of the economy as a whole.
At the same time, we’ve seen these CDOs, their pundits, politicians, and central bankers alike deny reality (gaslight) about the recession that is coming (that is already here) — that was entirely their making.
To greatly simplify:
Rapidly pour money into ‘The System?' Prices of everything go up.
Rapidly remove money from ‘The System?’ ???
It was never Putin’s price hike — that was more ‘gaslighting.’
When you rapidly drawdown money already in ‘The System’, all sorts of bizarre and unexpected things can happen. Dramatic fluctuations in prices — which we’ve become accustomed to on the upwards side — as different elements of the supply chain constrict or expand correspondingly — are going to continue.
When you add too much money to ‘The System’, as was the case after 2008, you get many strange phenomenon …examples of which are myriad Frankenstein fraud companies like Theranos and WeWork.
Perverse incentive structures create perverse outcomes.
When you slow the flow of money, you turn down the velocity of ‘The System.’
Deals stop being made. Economic growth (by whatever measure that is) stops occurring.
Deflation (possibly) happens.
In order for growth to stop occurring — someone’s pocket needs to get picked.
That’s where you conveniently come in to save the day, in one of several different ways for the modern flunkie CEO who drove his bank, brokerage firm, or business into the ground.
Bailouts happen when the government (with your tax-dollars) steps in to provide cash (sometimes gaslit as ‘liquidity’) to a bank, or any company, that has made a sufficient number of bad decisions as to precipitate their own demise.
In capitalism, that company is supposed to die on the vine so that something else can take its place, and presumably not fail.
That concept no longer exists. Broken, zombie companies are all around.
There’s another way that the central bank cartel and its cronies can manage a crisis of sufficient size… and that is known as a Bail-In.
Bail-ins happen when you give the bank $100, the bank & government say:
“oops, we made a mistake, here’s your $80 back”
Occasionally, they give this back to you in worthless equities [stocks] or something other than what you had before [Umm…HELLO, CBDCS], and you continue on about your day.
It’s right here on Investopedia:
Read all of those ‘reasons’ several times. Was SVB ‘TBTF’?
No. But it was bailed out for political purposes anyway. And they lied, calling the bailout a “backstop.”
Bail-Ins happen when:
“The government does not possess the financial resources necessary for a bailout.”
This has already happened in Cyprus — and as mentioned clearly above, Europe as a whole, after 2008. Depositors with money in their accounts received sometimes received stock in their bank in exchange for the money they previously had. The value of the bank stock does not equate to the amount of money they had in their accounts.
This is known a “depositor haircut.”
Calling it now.
Before this is all over (and I mean all over), everyone is going to learn what a “bail-in” is, firsthand.
Don’t overthink it, but do make sure you’re thinking about it.
Bail-In’s are thinking about you.
I was wondering what the hell was a "backstop?" I am no economics major so all I could think of is what the two words mean. Basically bulls__t, we are on the hook again.✝️🇺🇸