Best Inflation Indicator Makes Big Turn


The Best Inflation Indicator Ever

Inflation is over…if this indicator is right again. 

Paul Krugmanrecently said, “The markets are pricing in that inflation is over.”

If you are familiar with the Nobel Prize-winning economist turned New York Times columnist, you know how consistently wrong he is. 

Some of his greatest hits include a 1998 warning that, “The growth of the Internet will slow drastically.

And again after the election in November 2016 he stated, “If the question is when markets will recover, a first-pass answer is never.

And in December 2020 he forecasted a “Biden Boom.

All of them have been almost exactly wrong. 

It’s uncanny. 

This time he sees inflation as far worse than the market does. 

And, according to the best inflation indicator, inflation is already over. 

The price rises everyone is experiencing have slowed steadily recently. 

The fundamental driver of inflation, however, has been turning down for months now. 

We’re talking about M2 Money Supply.

This is the best estimate of the amount of money in the U.S. economy. 

The chart below from the Federal Reserve shows the M2 money supply over the last decade:

The chart shows a 38% increase in total money supply from the start of the pandemic spending binge to the peak. 

And prices for many goods and services have averaged 30% to 40% over the last couple of years too.

And it’s totally natural.  

More money and same stuff means prices go up about the same amount by about how much more money there is.

Of course, the price increases aren’t evenly spread. Essential items tend to rise higher. But the point is generally about there. 

Since then the growth in money supply has turned. 

It has actually declined by about 2% since peaking. 

That’s not much, but it’s not going up anymore. 

That means the primary driving force of the inflationary surge has stopped completely. 

It will show up in prices in time. 


burned 100 US dollar banknotes by Jp Valery is licensed under

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