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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

#81

Post by tylerhou »

cft wrote: post #68
dragonwriter wrote: post #62

Earlier quoted context omitted.

> Since M1 is already out there, we just have to wait for the V M1 can change day to day without change of the monetary base by behavior changes, and the Fed can reduce monetary base pulling down on M1 through open market policies. M1 is already out there means little, because it's not fixed. > Most importantly, without high M1, high M1V is not possible False. There’s no hard limit on V, so you can arbitrarily high “…

> False. There’s no hard limit on V, so you can arbitrarily high “M1V” with any M1. There's definitely a limit on the number of transactions. V ~ N_transactions_per_day * M1. With the fixed M1 you can up V only by upping N_transactions_per_day. Am I missing something?

num_transactions_possible is so high that it’s effectively unlimited.

It also doesn’t take into the size of of transactions.

Re: Show HN: M1 Chart – The stock market adjusted for the US-dollar money supply

#82

Post by tylerhou »

jkhdigital wrote: post #76
fny wrote: post #65

Earlier quoted context omitted.

But this isn't accurate either. Gold is highly correlated with interest rates. Why would I want to hold a rock that yields nothing if there are bonds that yield a real return? As of now we haven't hit a regime of negative real yields on long dated treasuries in the US. After being at ZIRP for decades with new inflation fears, I'd bet gold will continue to be punished as yields rise, so you may never see that same sig…

Gold has no yield (more like negative yield, due to carrying cost)... but also has no counterparty risk. Gold is an interesting option when real yields suck, but the real purpose is to preserve some semblance of wealth when the sovereign becomes insolvent.

The counterparty risk is that when the sovereign becomes insolvent, people won’t want to buy your gold because they’d rather have food and water.

Re: Show HN: M1 Chart – The stock market adjusted for the US-dollar money supply

#83

Post by tylerhou »

deanmoriarty wrote: post #12

I don’t understand this. My current portfolio is, say, 30 times my yearly living expenses. All I care about is that it will continue to grow in a way that stays at/above this ratio, so I will be able to retire early. The pace at which my yearly expenses inflate is much more correlated to CPI than money supply. My expenses haven’t changed much between 2019, 2020 and 2021 (projected), despite the large money printing,…

You shouldn’t care. This chart is making up claims of “obvious” inflation (despite no evidence) to push BTC and other cryptos. (That’s why the dropdown has crypto coins.)

Also, the person doesn’t really understand monetary policy or macroeconomics — inflation is measured by changes in the price of a currency. M1 only measures supply. The other half of the price equation (that is missing from this chart) is the demand of the currency.

Re: Show HN: M1 Chart – The stock market adjusted for the US-dollar money supply

#84

Post by icefrakker »

fny wrote: post #74
dragonwriter wrote: post #70

Earlier quoted context omitted.

> But interest rates are at 0, so they can't drop anymore Interest rates are not at zero [0], and interest rates, and their targets, can go negative. [1] [0] target range is currently 0-0.25%, actual is 0.08%: https://apps.newyorkfed.org/markets/autorates/fed%20funds [1] https://www.investopedia.com/terms/n/negative-interest-rate-...

The fed funds rate are not interest rates writ large however. This is the interest rates banks pay to borrow reserves over a short term. The markets for longer dated securities (i.e. 10Y and 30Y) more accurately reflect interest. The 10 year is currently at 1% and the 30 year at 2%.

So they are not at 0 and there is room for rate cuts.

Re: Show HN: M1 Chart – The stock market adjusted for the US-dollar money supply

#85

Post by tylerhou »

stephen_g wrote: post #36
Wolfenstein98k wrote: post #4

Oversimplified, 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.

Nonsense. MMT is a theory of how government finance works and interacts with the foreign and private sectors (including money, banking and debt). It’s not something you try. Overt Money Financing (OMF) is a policy option that MMT opens up, and there are probably shades of that in what’s going on, but I don’t see a whole lot of fiscal or monetary policy that actual MMT economists would say is a good idea.

Exactly — this is nowhere close to MMT. Stabilizing the price of the USD during recessions is literally the definition of Keynesian.

Re: Show HN: M1 Chart – The stock market adjusted for the US-dollar money supply

#86

Post by pieterhg »

dragonwriter wrote: post #40
choxi wrote: post #6

A 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…

> I think our current method of measuring inflation against the CPI is nonsense, It's not nonsense for policies that are directly concerned with consumer prices, which most that the CPI (or, more precisely, any of the CPIs, of which there are several) is used for do. We have lots of other inflation measures (, industry specific PPIs, for instance) for other purposes. > Measuring inflation (or whatever you want to cal…

Added the monetary base (MB) now for you: https://m1chart.com/?m=mb&stock=sp500&time=5%20years

Re: Show HN: M1 Chart – The stock market adjusted for the US-dollar money supply

#87

Post by nsomaru »

jrochkind1 wrote: post #57
code_duck wrote: post #51

Earlier quoted context omitted.

Grocery costs don't vary nearly as much regionally as housing, and also are not as significant a percentage of household budget, so that makes sense. Personally I find grocery shopping quite affordable, as I'm sure do most in the HN demographic. However the rate of people experiencing food insecurity in the US was around 12% prior to the pandemic, which shows that grocery costs are a serious concern for many. People…

It's definitely true that lower-income people spend a higher percentage of their income on groceries. But it's also true that the % of income spent on groceries on average has been dropping over time. Groceries may have made more sense as a metric when the CPI was invented than they do now. "Between 1960 and 1998, the average share of disposable personal income spent on total food by Americans, on average, fell from…

How does the growth and concentration of wealth in the hands of billionaires affect that data? An average doesn’t seem like a reliable stat in this context.

Re: Show HN: M1 Chart – The stock market adjusted for the US-dollar money supply

#88

Post by ItsMonkk »

jkhdigital wrote: post #77
ItsMonkk wrote: post #56

Earlier quoted context omitted.

> Assume doodads are $1 today. If tomorrow money supply is doubled, they will be $2. If you double every persons account, yes. If you do it through interest rates, you need to pay attention to the Cantillion Effect. The Cantillion Effect states that money flows from people who have it to things that those people want to buy. If you give money to rich people who have already reached capped consumption, they won't then…

And the more they print, the more wealth inequality there will be... unless they go straight helicopter money (although that would require substantial legislative changes).

I recently came across this journal article[0]. Basically it outlines how getting off the gold standard leads to where we are today due to a cycle of..

    1. Economy isn't doing as well as we hoped.
    2. Central banks lower the interest rates.
    3. Households and governments go further into debt now that they can get cheaper loans.
    4. We get a boom! Asset prices rise.
    5. The boom gradually ends as all available credit has been lent.
    6. People start paying off their debt, and the savers who they are paying end up saving more and more. The wealthy don't buy 200x as much food, etc...
    7. Economy isn't doing as well as we hoped.
One of the key lines in the article...

> In words, this implies that if the richest households’ wealth rises by 10%, the interest rate has to come down by 32 basis points

[0] https://scholar.harvard.edu/straub/publications/indebted-dem...

Re: Show HN: M1 Chart – The stock market adjusted for the US-dollar money supply

#89

Post by gamegoblin »

eloff wrote: post #78
nabla9 wrote: post #50

Earlier quoted context omitted.

I know. That's the tragedy if internet economics. It's incredibly natural and intuitive and wrong.

Its not your job to convince me, but you've been unsuccessful at it. I care what the truth is, not for any particular side, so I should be easier to convince than many. Why would increasing monetary supply not cause inflation? I'm aware there is a group in macroeconomics that believes that, but I think they're crazy. Do you have anything to support your position?

It's not just the money supply, but the "velocity of money" [1] that matters.

If the Fed prints 1 trillion dollars and gives it to me, but I keep it in my basement and never spend it, why would inflation be expected? The velocity of that money is zero, hence its impact on prices is zero.

Inflation rises relative to the money supply multiplied by the velocity of money.

[1] https://en.wikipedia.org/wiki/Velocity_of_money

Re: Show HN: M1 Chart – The stock market adjusted for the US-dollar money supply

#90

Post by conanbatt »

choxi wrote: post #6

A 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…

The standard definition of inflation is the general increase of prices. If only a subset of items increase in price, it's not really inflation.

It is tempting to say that you can have asset inflation while other assets deflate, but it's not consistent with the general topic of inflation that implies the currency gets devalued.

If the government said that it would collect a special tax to all goods but stocks of 1$, it will increase prices of many goods but it will not be inflation. It's a change in the relative price of goods.

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