A quick follow up to my recent post titled, "The U.S. Dollar isn't used as often as it once was to buy goods and services." [FN1]
Ask yourself this question, "If Americans are not utilizing the dollar as much to buy goods and services then how are people still consuming as much or more than they have in the past?" The answer, first consider what Kimberly Amadeo wrote in her article "Velocity of Money
The Reasons Why Everyone Is Hoarding Cash Now" [FN2].
The money supply does not include credit card purchases or amounts. Credit cards aren't a form of money, although they are used as such. Instead, they are a form of debt. The credit card company loans you the money to make the purchase. When you pay it back from your checking account, then that affects the money supply.
So...it makes absolute sense that Americans have buried themselves in debt because credit card purchases isn't included in M2V and look what was recently reported on April 8th:
Fed reports US consumer debt jumped by nearly $42B in February and the news even stated "that this record credit climb is a result of both people actually buying more things and paying more for items getting more expensive. [FN3]
It appears that Americans are are tapped out and spending from the future using credit cards. Remember that America is a 'debt based society'. Spending everything it makes plus some. Like government, like citizens. Sadly it cannot continue. The American economy will soon meet a period of hardship it has never seen nor could have ever realized. This isn't a prediction it is common sense. You cannot service a debt as cost continue to rise because a government has printed fiat currency (street vernacular is "money") - tongue in cheek - like it's going out of style. By the way, inflation IS the money printing. Rising costs is the result of money printing. Speaking of that "80% of all US dollars in existence were printed in the last 22 months (from $4 trillion in January 2020 to $20 trillion in October 2021" [FN4]
This is the FRED M1 Money Stock chart
From February, 2020, to February, 2022, M1 Money Stock increased by 416.98%.
M1 is the money supply that is composed of currency, demand deposits, other liquid deposits—which includes savings deposits. M1 includes the most liquid portions of the money supply because it contains currency and assets that either are or can be quickly converted to cash. [FN5]
As a matter of charts and numbers the M1 Money Stock has increased 1,491.9642% since February, 2008 to the present. That's annualized to 106.556887%. Wow!
Remember this: Gold is a store of wealth.
Since international gold is dollar denominated, any weakness in the dollar pushes up gold prices and vice versa. The inverse relationship is because firstly, a falling dollar increases the value of currencies of other countries. This increases the demand for commodities including gold. [FN6]
The above is for informational purposes only. Do your own research. This is not investment or trading advice.
