by Peter Schiff, Schiff Gold:
Money Supply is a very important indicator. It helps show how tight or loose current monetary conditions are regardless of what the Fed is doing with interest rates. Even if the Fed is tight, if Money Supply is increasing, it has an inflationary effect.
One key metric shown below is the “Wenzel” 13-week annualized money supply figure. It was made popular by the late Robert Wenzel who tracked the metric weekly as an indicator for where the economy might be headed. In 2020, the Fed started reporting the data monthly instead of weekly. It should also be noted that Money Supply data can be heavily revised in future months.
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Recent Trends
Seasonally Adjusted Money Supply is delayed by a month. The 11 consecutive periods of increased money supply are for Nov 2023 through September 2024. September growth was not as high as August, but was still another big month up.
Figure: 1 MoM M2 Change (Seasonally Adjusted)
The September increase was 4.6% annualized.
Figure: 2 M2 Growth Rates
That is slightly above the September average of +4.1%.
Figure: 3 Average Monthly Growth Rates
Non-seasonally adjusted numbers show data through end of September, and show another big up month of $124B. This is inclusive of the entire month of September.
Figure: 4 MoM M2 Change (Non-Seasonally Adjusted)
The weekly data below shows the spikes and dips.
Figure: 5 WoW M2 Change
The “Wenzel” 13-week Money Supply
The late Robert Wenzel of Economic Policy Journal used a modified calculation to track Money Supply. He used a trailing 13-week average growth rate annualized as defined in his book The Fed Flunks. He specifically used the weekly data that was not seasonally adjusted. His analogy was that in order to know what to wear outside, he wants to know the current weather, not temperatures that have been averaged throughout the year.
The objective of the 13-week average is to smooth some of the choppy data without bringing in too much history that could blind someone from seeing what’s in front of them. The 13-week average growth rate can be seen in the table below.
Growth has been positive for 40 of the last 41 weeks, with only a very slight dip 11 weeks ago. Right now, the trend is definitely positive.
