Industrial Production Peaked 18 Months Ago, Where’s the Recession?

Contrary to the FED’s technical staff, retail MMMFs are nonbanks.

In my 1958 Money and Banking text. “Purchases and sales between the Reserve banks and non-bank investors directly affect both bank reserves (outside money) and the money stock (inside money).”

Mises has it right:

“The definition of M2 includes money market securities, mutual funds, and other time deposits. However, an investment in a mutual fund is in fact an investment in various money market instruments. The quantity of money is not altered as a result of this investment; the ownership of money has only changed temporarily. Hence, including mutual funds as part of M2 results in the double counting of money.”

see: “Correlations and the Definition of the Money Supply”

October 19, 2023

https://www.misesfans.org/2023/10/correlations-and-definition-of-money.html

There’s not much new under the sun. It’s the credit school vs. the money school.

Since the monetary authorities make their determinations on the basis of the size and not the “mix” or the bank credit proxy, there is no a priori reason to assume that an expansion of time deposits will alter the FOMC’s consensus as to the proper volume and rate of change in bank credit.

The FOMC’s proviso “bank credit proxy” used to be included in the FOMC’s directive during the period Sept 66 – Sept 69. That’s the “credit school” (that the money stock is a by-product of credit policy, as opposed to the “money school” (the tangible stock of our primary or means-of-payment money supply, is the only valid indicator of monetary conditions).

Increases in DFI loans and investments [earning assets/bank credit], are approximately the same as increases in transaction accounts, TRs, and time deposits, TDs, [savings-investment deposits/bank liabilities/bank credit proxy] excluding IBDDs.

That the net absolute increase in these two figures is so nearly identical is no happenstance, for TRs largely come into being through the credit creating process, and TDs owe their origin almost exclusively to TRs – either directly through transfer from TRs or indirectly via the currency route or through the DFI’s undivided profits accounts.  

In the credit school, large CDs constitute an increase in credit. They are thus, obviously, an increase in the money stock. Large CDs represent shifts from other deposit classifications. In other words, monetary policy is loose.  Combine that with the FED counting MMMFs as banks and you get the rise in gold and other commodities, in other words, a rise in inflation.

Predictions!

Some things are relatively easy to predict, though not with 100% certainty. Such as:

World population should continue to grow. Which means that demand for basic necessities such as water, food, shelter and energy will continue to grow.

Mankind will continue GHG emissions, which will continue to warm the planet, causing more economic stresses.

Demographics. In a large number of countries, birth rates are dropping and the number of elderly (retired) is rapidly growing, which results in a shortage of skilled workers. This will continue for a while.

Technology will continue to advance, and change the job market, requiring more skilled workers.

Prices of most things affected by technology will continue to drop, while everything else will go up in price.

But trying to predict a recession, inflation, deflation, interest rates, GDP etc is very difficult and those attempting to make those predictions are bound to be wrong most of the time.

Yet many folks here seem to think that the Fed, the government, academics, economists, and other “experts” should be able to predict these things with a high degree of accuracy, and lambast them when they get it wrong. Of course they will be wrong most of the time. To think otherwise is downright stupid.

Just like all those here who have confidently been predicting a recession, depression, hyperinflation, the end of the world, and other assorted doom and gloom for decades. Wrong, year after year after year.

I will make a prediction. Many of you will continue to predict doom and gloom and hide in your bunker with your gold bars and guns, while searching out every cult conspiracy theory possible; and I will continue to focus on improving my health and wealth and looking forward to a better future.

Gotta love this market volatility. I hope some of you are taking advantage of it.

Don’t worry, Mish, we are living in that time when (just like in the “Coyote and Roadrunner cartoons” where the Coyote doesn’t fall down after rushing off the
cliff until he finally realizes there is nothing but plain air under his feet)
things are kept afloat with “unknown desperate forces” which we all don’t quite
understand.

1. As Lyn Alden says maybe rolling sectors
2. Pelosi stealinng incoming Congress spending authority with outrageous bill, then new Congress keeping it there
3. CHIps Act and Inflation Enhancement, aka Green New Deal money burning act injects more trillions for corps
4. The recession hits when corps have to refinance at higher rates, which is coming later this year and for the next couple years

So depression inbound. The Dark Powers may even let Trump win so they can blame it on him.

Why haven’t the academics at Harvard (home to NBER) declared a recession?

Haven’t they been a little busy with a plagiarizing college president? A donor class dominated by pro-Israel alum, but a DEI selected class dominated by pro-Gaza students?

A faculty that prosecutes student plagiarists, rewards faculty plagiarism if it means getting published more – and raises tuition by 3-4x inflation year after year after year? A board of trustees (Harvard Corporation) that operates the largest hedge fund in the country, without paying a penny in taxes, while complaining that other people aren’t paying enough?

I reject the notion that its not a recession unless the NBER says so, but if we are going with that definition, then the NBER was otherwise occupied.

And many of the NBER members think the economy went straight into stagflation, but they are not allowed to say so without getting cancelled and chased off campus