by Charles Hugh Smith
Of Two Minds
The U.S. stock and bond markets and its entire financial system now teeter on the edge of collapse if there is even a slight hint that 1) the Fed won’t give more free candy to Wall Street or 2) the Fed has lost control of the Dead Money Economy it has created.
Take a quick glance at these depictions of Dead Money: while the broad measure of the money supply in the U.S., M2, has gone up 12-fold since the start of 1981, the velocity of money–how many times it changes hands over a period of time–has collapsed.
What does this tell us about the U.S. economy and what lies ahead? The Federal Reserve’s FRED database provides a definition of M2 that’s a good starting place.
Note that the Fed refers to money stock, where the word stock refers to the sum total of money in the system, as in “the store is fully stocked with merchandise”. They’re not referring to the stock market, but to all the money that’s in the “store” of our financial system: cash, money in checking accounts and money market funds, etc. Here’s the definition of M2: