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 ācountingā the money supply differently after May, 2020 as well? Yep. Thatās 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. Itās kind of similar to how they gaslight you and tell you āinflation is coming downā ā but what they really mean is, the ārate of increase in inflation is slowing.ā Those are two very, very different concepts.
The rate was slowingā¦and now itās 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 ā finally ā getting inflation to invert (called deflation) ā 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 āvelocity of moneyā 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 āsystemā performing in relatively and fundamentally predictable ways. So fundamentally predictable that āeconomistsā ā like meteorologists (another B.S. profession) ā can make āforecastsā about it. Somehow, theyāre always wrong, but they get to keep their jobs ā and they get raises.
This is how & why Corporate Disinformation Outlets (CDOs) have been ātelegraphingā to all (who care to look) that a recession is coming due to central bank policy. Itās a feature of the central bank cartel that they, and they alone, can āheatā and ācoolā 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, weāve seen these CDOs, their pundits, politicians, and central bankers alike deny reality (gaslight) about the recession that is coming (that is already here) ā that was entirely their making.
To greatly simplify:
Rapidly pour money into āThe System?' Prices of everything go up.
Rapidly remove money from āThe System?ā ???
It was never Putinās price hike ā that was more āgaslighting.ā
When you rapidly drawdown money already in āThe Systemā, all sorts of bizarre and unexpected things can happen. Dramatic fluctuations in prices ā which weāve become accustomed to on the upwards side ā as different elements of the supply chain constrict or expand correspondingly ā are going to continue.
When you add too much money to āThe Systemā, as was the case after 2008, you get many strange phenomenon ā¦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 āThe System.ā
Deals stop being made. Economic growth (by whatever measure that is) stops occurring.
Deflation (possibly) happens.
In order for growth to stop occurring ā someoneās pocket needs to get picked.
Thatās 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 āliquidityā) 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.
Thereās another way that the central bank cartel and its cronies can manage a crisis of sufficient sizeā¦ and that is known as a Bail-In.
Bail-ins happen when you give the bank $100, the bank & government say:
āoops, we made a mistake, hereās your $80 backā
Occasionally, they give this back to you in worthless equities [stocks] or something other than what you had before [Ummā¦HELLO, CBDCS], and you continue on about your day.
Itās right here on Investopedia:
Read all of those āreasonsā several times. Was SVB āTBTFā?
No. But it was bailed out for political purposes anyway. And they lied, calling the bailout a ābackstop.ā
Bail-Ins happen when:
āThe government does not possess the financial resources necessary for a bailout.ā
This has already happened in Cyprus ā 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 ādepositor haircut.ā
Calling it now.
Before this is all over (and I mean all over), everyone is going to learn what a ābail-inā is, firsthand.
Donāt overthink it, but do make sure youāre thinking about it.
Bail-Inās 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.āļøšŗšø