Email of the day on global liquidity measures:
Comment of the Day

May 06 2019

Commentary by Eoin Treacy

Email of the day on global liquidity measures:

I really think you are on to something here and you should develop your deficit chart and data set even more. It is always possible to refine econ data further, as any credible economist will attest.   Gavekal and others charge a fortune for “who’s supplying liquidity?” work as it’s key to fin mkts.  I would just observe that Friedmanesque/ Chicago school money theory is being severely tested as my client below notes…. velocity has simply not picked up as expected.  Hence the social Angst of the bottom  50%…versus top 1% ….rich get richer etc (Brexit, Trump etc)

Inflation or its opposite is “sticky”.  “The cause of inflation is…..inflation”.  Volcker had to jack rates far too high in 1980+ to reverse decades of inflationary psychology.  So it may be with its reverse, disinfl.  Maybe CBs have to keep rates lower for longer and even let ‘er rip, until the psychology changes (then MS and velocity finally pick up, pitching us into the next inflationary cycle).

Some good points below, from an LSE grad living in HK, a far better economist than I

Eoin Treacy's view

Thank you for your kind words and the attached analysis which highlights just how much money China has created, out of thin air over the last decade. Here is a section:

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