I’ll just leave this here then… receding liquidity will tank...

I’ll just leave this here then… receding liquidity will tank markets. This is my view and hopefully long termers won’t suffer. I’m an ARU bull but macro is awful, and deteriorating further. GLTA.


Liquidity contracts

M2 money supply contracted by $81 billion in April, the largest monthly contraction in the past sixty years.

The Fed has been a bit tardy in producing M2 figures for May — not a good sign — while declining bank deposits warn that the May contraction is likely to be worse. The May decline of $68 billion in deposits at commercial banks is the second largest recorded contraction, behind -$78 billion in November 2008.

A rapid decline in liquidity is likely to crash asset markets, including housing, stocks and bonds.

Conclusion

Inflation is likely to be persistent because of oil and gas shortages as well as a high level of job openings relative to unemployment. Oil and gas shortages are likely to continue until the Russia-Ukraine conflict is resolved. Hopes of a speedy resolution are fading.

We expect the Fed to attempt to slow the economy by crashing asset prices as much as by hiking interest rates. Persistent inflation is likely to require more severe action by the Fed, causing sharp falls in housing, stocks and bond prices.