Game Over?

The following graph demonstrates the percent change from a year ago of the bi-weekly adjusted monetary base.

As can be seen, the change has been dramatic over the recent past. In particular, since August it has been on a longer, sustained decline in comparison to previous periods.

Given the fiat monetary system that underpins our economy, this fall is simply a signal that the economic stability is on its last legs. Unless more money is pumped into the system, thereby reversing the fall we are witnessing in the graph, the so-called stability cannot be sustained.

The excess money printed provided support to strained markets. In other words, the consequence of such policy was to give the impression of low asset risk, thereby inflating their value. No doubt this was achieved. The problem is that when the monetary pump is closed (or the flow of funds decline), values cannot keep up. Policymakers don’t believe this, of course. It is why they are blindsided as to the true risks in our economy.