Curious why all the massive money-printing globally hasn't resulted in more inflation?
Trillions of dollars have been created out of thin air to help stimulate the economy and keep things humming along while the pandemic ravages economies world wide.
Globally we are over the equivalent of $10 trillion.
In the US alone, we have spent roughly $4 trillion, well depending on who you ask and how you define "spent".
Either way, it's at least several trillion that didn't exist prior.
Check out the increase in money supply over the last several years:
(Source:
)https://twitter.com/PrestonPysh/status/1335600320626499587/photo/1
- PrestonPysh
As you can see the money supply has been expanding at a rapid pace for a while now, but it really accelerated the last several months.
If it this were a stock chart, I'd call this the blow off top phase.
With all this money printing, why hasn't there been more inflation?
So far with all this new money printing, there hasn't been much inflation, well there has been some, but not like you would expect to see with this kind of expansion in the money supply.
There are several reasons for this, but the main one has to do with the velocity of money.
Specifically that it's slowing down.
Check out the velocity of money over roughly this same time period, and pay special attention to the far right side of the chart:
(Source:
)https://twitter.com/PrestonPysh/status/1335600320626499587/photo/2
- PrestonPysh
As you can see the velocity of money has fallen off a cliff these last several months.
If it were a chart it'd call this the capitulation bottom.
So, what's going on exactly?
Basically we have a scenario where a ton of new money was created but it's not really moving around much currently.
However, as the economy starts to open back up and economic activity starts to pick up again, we sill this trend start to change.
We will have all this new money, and we will have the velocity of that money start to pick up as the money makes its way through the broader economy.
At that point we will start to see asset prices across the board start to go up as too much money chases too few assets.
Currently much of that newly created money is sitting in bank accounts, in stocks, in bonds etc, but that will likely change as the economy starts to recover.
What do you think will happen to the price of bitcoin when inflation starts to become a factor?
I have a guess...
Stay informed my friends.
-Doc