Money Supply (M1) / GDP - 2M Chart

Milton Friedman's Money-Supply Rule:
Growth of the Money Supply << Rate of Growth of Real GDP = Recession
--There is not enough money to buy what has been produced.

Growth of the Money Supply >> Rate of Growth of Real GDP = Inflation
--There is an abundance of money and not enough goods - prices will rise

Growth of the Money Supply == Rate of Growth of Real GDP = Equilibrium

Bottom Line:
We are entering a severe inflationary period. Prices have increased a lot over 90 years and should be seeing this trend continue.
--Gold, Silver , Commodities , Assets will continue to increase as long as the below remains true.

--The Feds have resorted to unlimited quantitative easing to fight a deflationary spiral that would cause mass bankruptcies, unemployment, and credit/ liquidity shortages.
--Negative Interest Rates Next?


Since there is no measurable inflation, we can probably conclude that Friedman was wrong. Most likely because he assumed a stable velocity. He made the mistake of believing that bigger bank accounts mean more inflation even when no one is making purchases. To have the given price of a good increase, people have to actually be buying those goods whether or not they have the purchasing power to do so.
Nice chart.
This is what we needed
Finally someone willing to talk about the Fed's terrible ideas.
Great work!
I like your work..
Good fundamental analysis. Like it.
Great chart! How do I add this to my watch list? I was only able to find M1 but not the M1/GDP chart
@welf, you need to use the mathematic operations to get it
welf MadButcherWA
@MadButcherWA, how do you do that from tradingview? Thanks!
@welf, You have to explicitly type "M1/GDP" you're actually dividing M1 by GDP to get the chart.
+2 Reply
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