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    Recession Risk Grows After Money Supply Shrinks At Fastest Pace Since Great Depression

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    Even a child can recognize that the United States is in financial peril as the realization of Democrat Joe Biden’s Marxist utopia occurs.

    “Let me speak as if to a child…when M2 (money supply) year over year growth goes negative historically bad things happen…like financial panics. It happened in November 2022. It’s not a market timing tool but a clear warning that one should be seriously considering cash (money markets, t-bills etc) as a part of their asset allocation until the uncertainty clarifies. IMHO we are nowhere near clarity yet. Clarity for me is lower prices reflecting reality,” Edward Dowd wrote on Twitter, hoping to make a confusing situation more clear for us.

    This is the disaster that Biden and the Democrats have created, and they will cause unprecedented suffering for the American people.

    From the fall of 1930 to the winter of 1933, the United States’ money supply decreased by roughly 30 percent. During the historical period known as the Great Depression, the declining supply of funds lowered average prices by an equal amount.

    “Money supply has now been shrinking year-on-year since December, an unprecedented development in modern times that should make investors sit up and take notice – growth, asset prices and inflation could all weaken,” Reuters reported in March of 2023.

    According to media headlines, this is the current situation.

    After money supply shrinks at the fastest rate since the Great Depression, the risk of recession increases.

    The money supply in the United States shrunk for the third consecutive month and is falling at the quickest rate since the Great Depression, according to new data from the Federal Reserve.

    Andrew Moran reported the details for Epoch Times.

    In February, the M2 money supply – a measure of how much cash, bills, bank deposits, coins, and money market funds are circulating throughout the national economy – fell 2.24 percent from the same time a year prior, reversing January’s decline of -1.7 percent. This marked the third consecutive month of a declining money supply.

    The M2 money supply fell 3.13 percent year-over-year for the week ending March 6, pointing to another contraction in March.

    At the end of February, the total U.S. money supply stood at $21.099 trillion.

    Between 1929 and 1933, there was a 28 percent decline in the money supply.

    Despite the year-over-year decline, the money supply remains nearly 38% above its level prior to the pandemic.

    The downward trend, which began in February 2021, was the result of the central bank reversing its liquidity injections during the pandemic, the Federal Reserve reducing its immense balance sheet, and falling bank deposits.

    Many economies around the world are reporting sluggish or declining M1 money supply growth.

    The annual growth rate of M1 in the European Union contracted by 2.7% in February, compared to -0.8% in January. In January, the M1 of the United Kingdom slowed to 1.55 percent. Canada’s M1 has declined for three consecutive months, falling 3.57 percent in December 2022.

    Is the Recession Confirmed?
    Does this therefore indicate a recession? The decline in money supply growth in the United States and other countries, according to some economists, is an indicator of an impending economic crisis.

    “We have not seen money supply declines like this since the Great Depression,” said Mike Shedlock, an economist and registered investment advisor for SitkaPacific Capital Management.

    “The contrarian position isn’t that a recession will come later, but rather that it’s already started.”

    Professor of applied economics at Johns Hopkins University and senior fellow at the Independent Institute Steve Hanke believes “a U.S. recession is baked into the cake.”

    “Due to the Fed’s monetary mismanagement, the M2 money supply is falling at its fastest rate since the 1930s,” he stated.

    “The QUANTITY THEORY OF MONEY tells us that, w/ a 6-18 month lag after M2 drops, economic activity will slump.”

    However, others, such as Fed Chair Jerome Powell, believe that the money supply has no effect on the economy.

    “When you and I studied economics a million years ago, M2 and monetary aggregates seemed to have a relationship to economic growth,” Powell told Sen. John Kennedy (R-La.) during his semiannual monetary policy report to Congress in 2021. “Right now … M2 … does not really have important implications. It is something we have to unlearn I guess.”

    On February 7, 2023, Federal Reserve Board Chairman Jerome Powell gives an interview at the Renaissance Hotel in Washington. (Julia Nikhilson/Getty))

    In the interim, numerous prominent recession indicators are once again flashing red.

    More on this story via The Republic Brief:

    The six-month average of the Conference Board Leading Economic Index (LEI), which assesses credit, labor, and manufacturing, is negative 3.6 percent. CONTINUE READING…

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