Show HN: M1 Chart – The stock market adjusted for the US-dollar money supply
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Re: Show HN: M1 Chart – The stock market adjusted for the US-dollar money supply
#2Why would you adjust for usd money supply? The only reason my (uninformed) self sees is that it’s arbitrary but fits a fiscal Hawk narrative. Fwiw I’m worried about inflation, but this seems uninteresting.
Re: Show HN: M1 Chart – The stock market adjusted for the US-dollar money supply
#3Why would you adjust for usd money supply? The only reason my (uninformed) self sees is that it’s arbitrary but fits a fiscal Hawk narrative. Fwiw I’m worried about inflation, but this seems uninteresting.
The claim is that there is an asset bubble. In other words, stocks and real estate are being inflated, whereas the products that constitute the traditional measure of inflation (basket of goods with bread milk and eggs in it) are not.
This attempts to show the “real” inflation so to speak.
Re: Show HN: M1 Chart – The stock market adjusted for the US-dollar money supply
#4Oversimplified, but a very good visual representation of the scale of recent money-printing.
MMT is being tried in realtime, even as the debate roundly defeats it.
Re: Show HN: M1 Chart – The stock market adjusted for the US-dollar money supply
#5Why would you adjust for usd money supply? The only reason my (uninformed) self sees is that it’s arbitrary but fits a fiscal Hawk narrative. Fwiw I’m worried about inflation, but this seems uninteresting.
You have to adjust nominal returns with something, and exactly what you use is a matter of style and taste. Exactly what adjuster to use is always arbitrary.
Money supply is a lot simpler than inflation, because something like M2 is a pretty simple sum while inflation is a weighting that is a bit hard to follow the implications of (the handbook for how to calculate inflation is a bit of a doorstop, from memory).
Plus if an investment aren't even keeping a constant slice of the monetary pie an investor has good reason to be nervous about their strategy. There is a monetary firehose out there and it makes sense to get in on it.
Re: Show HN: M1 Chart – The stock market adjusted for the US-dollar money supply
#6A lot of people say there’s no such thing as asset inflation [1] and I find that very confusing. Hypothetically, if we add $1T to the economy and everyone invests it into stocks, is that not inflation? I guess economists say it’s not, but it feels like a pedantic argument about assets being “overpriced” not “inflated”.
I think our current method of measuring inflation against the CPI is nonsense, the basic premise that you can assume the price of e.g. milk is stable doesn’t even make sense. There’s changes in manufacturing, quality, brands, and market demand that aren't accounted for in the CPI.
Measuring inflation (or whatever you want to call the difference between an asset's nominal value and it's intrinsic value) is still useful, but the current method of pegging everything against the bag-of-goods in the CPI seems like an overly simplistic model. This approach of normalizing asset prices against the M1 supply seems more reasonable to me. The intrinsic dollar value of an asset is its value relative to how many dollars there are, not relative to whatever the price of milk is.
1. http://noahpinionblog.blogspot.com/2013/07/asset-price-infla...
Edit: I am clearly not an economist, please see some of the informative comments below. In particular, it sounds like the CPI does account for some complexities, asset inflation is more commonly supported than I thought, but normalizing by M1 might not make any more sense than CPI.
Re: Show HN: M1 Chart – The stock market adjusted for the US-dollar money supply
#7If the red line is the "M1-adjusted" price I would suggest having the "-adjusted" as part of the dropdown box, or some other way of making that more obvious. At first I thought the red line was just "M1".
Re: Show HN: M1 Chart – The stock market adjusted for the US-dollar money supply
#8If the red line is the "M1-adjusted" price I would suggest having the "-adjusted" as part of the dropdown box, or some other way of making that more obvious. At first I thought the red line was just "M1".
Thanks, done!
Re: Show HN: M1 Chart – The stock market adjusted for the US-dollar money supply
#9A lot of people say there’s no such thing as asset inflation [1] and I find that very confusing. Hypothetically, if we add $1T to the economy and everyone invests it into stocks, is that not inflation? I guess economists say it’s not, but it feels like a pedantic argument about assets being “overpriced” not “inflated”. I think our current method of measuring inflation against the CPI is nonsense, the basic premise th…
> There’s changes in manufacturing, quality, brands, and market demand that aren't accounted for in the CPI.
https://www.bls.gov/cpi/quality-adjustment/questions-and-ans...
Re: Show HN: M1 Chart – The stock market adjusted for the US-dollar money supply
#10This is very confused "Internet economics" take on the issue.
Money in band account that is not used is just a number. As Fed puts more money into the economy, the velocity of money decreases as the money is used less. https://fred.stlouisfed.org/series/M2V
Federal Reserve can increase and decrease effective money supply as it pleases. Money supply does not determine the prices as we have learned over last two decades.
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Edit: some real issues affecting stock price valuation.
(1) Global savings glut https://en.wikipedia.org/wiki/Global_saving_glut
(2) low real interest rates, typically measured as yields on inflation-indexed government bonds https://fred.stlouisfed.org/series/DFII10 If real interest rate is 10%, only this years earnings matter. If the interest rate is very low or negative, like they are now, time horizons grow accordingly.
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Edit2. "real" things in economy are things like real output.
The level of goods and services produced depends on the factors of production. How much capital, labor, level of technology rather than the amount of currency circulating. This means that the money supply can't affect the real level of output in the long run.