Follow the Money
With inflation being a key focus of mine, it’s no surprise that a significant portion of my research highlights are focused on the subject.
The 70-page report, ‘Follow the Money’, published in September 2022, forms my most significant single publication.
In addition to providing an extensive ~30 page breakdown of the theory and drivers of inflation, in then applying this theory to the present day situation in the United States, the report presciently noted that amidst a stagnating M2 money supply, there was:
“a significant likelihood that the YoY CPI growth rate peaked in June 2022, though the lagging nature of rental measurements in both the CPI and Personal Consumption Expenditures Price Index, may keep inflation measurements artificially elevated for longer than otherwise, raising the risk of a policy mistake from the Fed.”
The report also made the following conclusion:
“There appears to be a real danger that the Fed repeats its previous mistakes in reverse—i.e. after previously assuming that an artificial expansion of M2 would not cause high inflation, it now fails to recognise that with no growth in M2, current policy settings are already having a restrictive effect, and that the hard work on inflation has already been done. An increasingly hawkish stance instead risks an artificial ceiling or contraction of M2, potentially pushing the economy into a significant recession. This, as opposed to whether inflation will fall, is now the much bigger concern.
While the Fed is hawkish now, with few policymakers recognising the importance of M2 growth in creating today’s high inflation, we can be almost assured of what their response would be to a significant recession—large government stimulus financed by the Fed, and a sharp reduction in interest rates. If the measures were large enough, this would see another artificial rise in M2, and another bout of high inflation lie in wait. The current cycle would repeat. Perhaps the best question of all, is given how many times these mistakes have been made, and thus how high debt levels now are, how many more times can this cycle be repeated before a much more sinister outcome (i.e. hyperinflation) ensues?”
With US inflation for the current cycle proving to have peaked in June 2022, the M2 money supply reverting its largest declines since 1933, and banks collapsing under the weight of lower asset values and falling deposits, the market is now awakening to what Follow the Money revealed in September 2022.
No longer is the market selling government bonds left, right and center, as it frets over the inflation outlook (as it was doing at the time Follow the Money was published), and instead of being worried about the US inflation outlook, it’s instead more worried about the economic damage caused by falling bank deposits & the Fed’s aggressive tightening.
Remember, Economics Uncovered is not your usual reactive sell-side research provider. Instead, I’m not afraid to go against the grain. I focus on the bigger picture and the long-term impacts. Rather than short-term focused flip-flopping, Economics Uncovered provides market leading research insights.
You can view the full 70-page report here.
Continuing to explain the impact of a decline in bank deposits & the M2 money supply
Following on from the special 70-page report, I have continued to regularly highlight the dangers that stem from the Fed continuing with its aggressive monetary policy tightening in the face of a declining M2 money supply.
This includes several long-form Twitter posts:
Monthly CPI previews
Each month I provide a detailed preview of the upcoming US CPI report, which includes my own personal forecast.
Here’s my personal track record for 2023:
- January 2023: my estimate: 6.3% / consensus: 6.2% / actual: 6.4% – report
- February 2023: my estimate 6.0% / consensus: 6.0% / actual: 6.0% – report
- March 2023: my estimate: 5.2% / consensus: 5.2% / actual: 5.0% – report
- April 2023: my estimate: 5.0% / consensus: 5.0% / actual: 4.9% –
report
A range of current events
In order to help keep you abreast and well-informed of important economic events as they occur, you can expect Economics Uncovered to provide a detailed breakdown and analysis.
Past articles produced include:
- Why the Fed is losing billions every week & its implications
- The Fed’s dovish tilt shouldn’t have been surprising
- Silicon Valley Bank: what went wrong & what lies ahead for the US economy
- As long as the Fed keeps tightening, the banking crisis will grow
Key theory & technical detail
Finally, what would an economics research publication be without getting into some nitty gritty economic theory?
In addition to expounding upon some of my economic theories in more detail, you can also expect to find explanations of important technical matters.
In addition to the theory found within Follow the Money, you can see further detail on my theory behind inversions of the M2 money supply and GDP here, and an example of an important technical explanation, being the shelter component of the CPI, here.