The most useful leading indicator of the global boom-bust cycle: updated

The most useful leading indicator of the global boom-bust cycle: updated. The original, by Steve Saville.

The long-term economic oscillations between boom and bust are caused by changes in the money-supply growth rate. …

What “Austrian” economists refer to as TMS (True Money Supply) is the most accurate monetary aggregate. Whereas popular measures such as M2, M3 and MZM contain credit instruments, TMS only contains money. Specifically, TMS comprises currency (notes and coins), checkable deposits and savings deposits. …

This prompted me to develop a monetary aggregate that I call “G2 TMS”, which combines the US and euro-zone money supplies. Here is a monthly chart showing the growth rate of G2 TMS.

The rate of change in the G2 TMS growth rate has been the most useful leading indicator of the global boom-bust cycle over the past two decades. Of particular significance, a decline in the G2 TMS growth rate from well above 6% to below 6% warns of a shift from boom to bust within 12 months.

The update, from Brian Chang.

The money supply growth rate dipped below 6% at the beginning of 2018. It hasn’t dropped below this by much (I wasn’t able to find you a graph in the public domain showing the last few months), so that will delay the bust somewhat. It is now 12 months later, and “everyone” knows markets are swooning badly and a recession is coming unless the central banks “do something” (aka create more money and hand it out to their friends to buy stuff on the markets).