Global Money Supply Soaring While Bitcoin’s Upcoming 3rd Supply Cut Has It Surging
- Global money supply soars, global expansion weakness
- Fed gives signals of a rate cut, stock climbs up while dollar on course to more losses
- Gold nearing 6 year high, Bitcoin shoots past important $10,000 level
The money supply is the total value of monetary assets available in an economy that usually includes currency in circulation and demand deposits. A change in the money supply affects inflation, exchange rate, and price level.
There has been strong empirical evidence of a direct relation between money-supply growth and long term price inflation. Once such example is of Zimbabwe which registered rapid increases in its money supply leading to an extremely rapid increase in price causing hyperinflation.
United States Money Supply M2
M2 is a measure of money supply that includes cash, checking deposits and easily convertible money. It is a closely watched indication of money supply, inflation, and a target of the central bank’s monetary policy.
In the United States, the Federal Reserve balances unemployment and inflation by a number of ways. One of which is by manipulating the M2 money supply. It has grown with the economy, rising from $4.6 trillion in January 2000 to $14.5 trillion in January 2019.
The most extreme growth was registered when the rate of M2 expansion went above 10% in September 2001, January 2009 and January 2012. These accelerated periods coincide with recessions and economic weakness.
Global Money Supply Soars To All-Time Highs, While Economic Data Weakens. pic.twitter.com/nsEIswAYLj
— Daniel Lacalle (@dlacalle_IA) June 21, 2019
The global expansion according to IMF has weakened with the global growth forecast for 2019 and 2020 already been revised downward. Additionally, risks to global growth also tilt to the downside.
In the US, the economy flow higher in 2018 only to come back down this year that has the Federal Reserve being called to rescue the bond market prices with aggressive rate cuts. This experts say is looking more like Trump’s predecessor, Barack Obama’s economy.
Now, the Fed has signaled that a rate cut is coming that has the US Treasury yields turning lower and the dollar taking a drop as well while stock market surged to record highs. The question is if it will sustain.
Gold And Bitcoin Flying High
This has the price of gold hitting a nearly 6 year high after seeing the best week in over 3 years. Silver also on track for best week in 2019 with the dollar is on course for a weekly loss.
Gold prices are expected to soar even more due to a number of reasons including central banks buying record amounts of gold, excessive US sanctions also pushing countries towards gold while Feds reversal that bodes well for its strength.
Some of these also work in Bitcoin’s favor that is currently hitting 17-months high as it climbs to $10,900 level. The world’s first cryptocurrency is primed for more gains as its makes it way towards the third supply cut in 2020 called Bitcoin reward halving.
Bitcoin is just getting started on its fourth parabolic rise that will have us surpassing the trillion dollar market capitalization and overtaking gold, showing potential as a safe haven during the time of crisis which seems to be on the horizon.