Thanks. Why is the line on the monetary conditions chart so low? Inverted YC? Decline in M2? Or what other components are so low relative to the zero line? This chart Does not make sense with stocks, gold and Bitcoin rising and Credit spread not elevated. Something seems off.
Includes: change in China 5yr bond yield, change in US 10yr bond yield, Europe real M2 growth, UK monetary conditions, China credit impulse, Developed markets + EM monetary conditions (change in policy rates, real rates, bond yield levels vs model), change in USD, loan officer survey
So basically:
-interest rates are higher, and went up quickly
-central banks tightened monetary policy
-USD up, banks tightened credit policy
i.e. fundamental measures of monetary conditions are tighter (not market metrics like stock prices or credit spreads)... in other words, it costs more to borrow and credit is less easy to get
thanks. i think this indicator needs some fine tuning because it is probably way off as indicated by the sharp divergence in the chart. remember, the absence of excessive easing and egregious yield curve suppression does not mean tightening in economic terms. Einstein said that darkness is just the absence of light, which means the absence of one thing does not necessarily mean the presence of another. Your tight money indicator is the one that is probably off because we (and the world)only removed excessive easing caused by the reaction to COVID. The indicator suggests that “real” tightening was not significant enough to derail the economy.
Thanks. Why is the line on the monetary conditions chart so low? Inverted YC? Decline in M2? Or what other components are so low relative to the zero line? This chart Does not make sense with stocks, gold and Bitcoin rising and Credit spread not elevated. Something seems off.
Includes: change in China 5yr bond yield, change in US 10yr bond yield, Europe real M2 growth, UK monetary conditions, China credit impulse, Developed markets + EM monetary conditions (change in policy rates, real rates, bond yield levels vs model), change in USD, loan officer survey
So basically:
-interest rates are higher, and went up quickly
-central banks tightened monetary policy
-USD up, banks tightened credit policy
i.e. fundamental measures of monetary conditions are tighter (not market metrics like stock prices or credit spreads)... in other words, it costs more to borrow and credit is less easy to get
thanks. i think this indicator needs some fine tuning because it is probably way off as indicated by the sharp divergence in the chart. remember, the absence of excessive easing and egregious yield curve suppression does not mean tightening in economic terms. Einstein said that darkness is just the absence of light, which means the absence of one thing does not necessarily mean the presence of another. Your tight money indicator is the one that is probably off because we (and the world)only removed excessive easing caused by the reaction to COVID. The indicator suggests that “real” tightening was not significant enough to derail the economy.