During the COVID-19 pandemic, central banks such as the US Federal Reserve loosened fiscal and monetary policy. Now, these same financial institutions appear to be engaging in quantitative tightening (QT) practices. According to Nick Gerley, CEO and founder of Reventure Consulting, “the money supply is officially shrinking.” This has happened only four times in the last 150 years. Gerley warns that every time this happens, a depression follows with a double-digit unemployment rate.
Contraction of money supply and its effect on the economy
Many market analysts and economists are uncertain about the future of the economy, while many believe things will soon take a turn for the worse due to significant inflation and failures in central planning. When the COVID-19 pandemic struck, the US government and many other nation-states around the world funded trillions of dollars In debt to keep the economy afloat. Debt has risen to enormous levels, and many believe it could overwhelm many Western economies. Speculators say this will hurt the dollar and only hard assets will survive the fall.
In a recent interview at the 2023 BMO Metals, Mining and Critical Minerals Conference, Rob McEwen”Hard assets will rise in value as the dollar falls in value relative to other currencies because governments are irresponsible. They borrow from their citizens by printing excess money and in ways that Which they shouldn’t… Look at the amount of debt most of the western world has right now; it’s huge.
On March 8, 2023, nick gerleyCEO and Founder of Reventure Consulting, warning that the money supply is shrinking. “The money supply is officially shrinking,” Gerli said on Wednesday. This has happened only four times in the past 150 years, and each time, a depression followed with a double-digit unemployment rate.
The venturer executive insists that when inflation rises the money supply contracts, making it a “bad combination” because fewer dollars are available to pay for higher prices, eventually leading to a deflationary crash.
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This is exactly what happened in the Depression of 1921. (not the Great Depression). This happened after WWI and the Spanish Flu. Where there were years of high inflation/money supply growth. and then what. 11% deflation and the unemployment rate skyrocketed. It only took a -2% contraction of the money supply in 1921 to cause a deflationary depression in 1921.
The Reventure executive said that there has already been a 2% contraction in 2023. Gerley says this shows that ‘the resilience of our economy and the current inflation may not be as strong as people think.’ However, Gerli believe in that there is still a significant amount of money circulating in the financial system in 2023, with the money supply roughly 35% higher than pre-pandemic, at $21 trillion. Nevertheless, history shows that just a little tiptoeing and depression and deflation can escalate.
,[The] The historical record is clear: there doesn’t need to be a ‘linear’ decrease in the money supply for recession/deflation to occur – it just has to be a bit. 2-4% contraction YoY – and then there are problems,” Gerli couple,
girlly thinking That people are focusing too much on rate hikes and not paying attention to quantitative tightening (QT) practices and money supply. He thinks that at the current pace, the money supply will shrink further while recession fears grow and inflation persists. “That’s how you get system meltdowns and deflationary depressions,” Gerley said. Stressed on, The venturer executive said that a deflationary depression in 2023-24 is “no guarantee.” Because governments are watching closely, there is a possibility that they may “try to print money again, send out stimulus checks, and try to re-ignite inflation/the economy,” According To Gerli.
What do you think the government should do to address a possible contraction of the money supply and the threat of a deflationary depression? Share your thoughts in the comments below.
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