GREAT DEPRESSION 2.0 STARTED!

Published: June 17, 2024, 4:52 p.m.

In this episode, we address the alarming claim that the recent 3.94% drop in the M2 money supply signals the onset of a Great Depression 2.0. Joined by Taylor from Life Goal Investments, a ten-year Wall Street veteran, we break down why this decline, despite its historical significance, may not spell disaster for the economy. We discuss the unprecedented stimulus injected during COVID-19, the current state of fiscal policies, and the role of credit spreads and market liquidity in shaping economic conditions. Tune in to gain a comprehensive understanding of why this situation is different from past economic downturns.

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  • The M2 money supply has fallen 3.94%, raising fears of a Great Depression 2.0.
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  • Historical context: Previous significant drops in M2 have correlated with depressions, but the current scenario is different due to the massive COVID-19 stimulus.
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  • The importance of looking at long-term trends: Despite the recent drop, M2 money supply is still up 29% from pre-COVID levels.
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  • The role of fiscal policy: While monetary policy is tightening, fiscal conditions remain loose, as evidenced by the National Financial Conditions Index.
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  • Impact of high federal funds rates: These primarily affect variable rate debt, but most homeowners are locked into fixed-rate mortgages, mitigating the impact.
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  • Breakdown of M2 components: Savings, checking accounts, and money market accounts are included, while stocks are not, explaining part of the decline.
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  • Current market behavior: Money is moving from safe assets like money markets to riskier assets like stocks and cryptocurrencies.
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  • Credit spreads indicate market confidence: Tight spreads suggest investors are confident in companies' ability to meet debt obligations, signaling economic stability.
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  • Lessons from the 2008 financial crisis: Modern regulatory measures are designed to prevent bank failures from causing systemic crises.
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  • The importance of supporting banks: Ensuring bank stability is crucial for maintaining economic liquidity and preventing severe recessions.
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