Goldman Asks: “Might This Be A Monetary Juncture Akin To 1995 Or 2011” 

In a client note on Friday, Goldman’s Mark Wilson commented on the money supply (M2) growth, which has noticeably turned upward following the most significant crash since the Great Depression. He questions if this is an inflection point in a “monetary juncture akin to 1995 or 2011.” 

“Although we may be 12 months past the inflection in M2, the historic analog of that chart does pose the interesting macro question of might this indeed be a monetary juncture akin to 1995 or 2011,” Wilson wrote. 

M2% Y-o-Y chart via Wilson’s note:

As a reminder, the complete disinflation trend followed the M2 growth slump and really should’ve fallen faster if deficit spending wasn’t so out of control. The latest CPI bounce comes after the money supply bottomed about one year ago and, of course, rising deficits, with the federal government spending $1 trillion every 100 days. 

On a separate note, Tressis chief economist Daniel Lacalle recently pointed out, “The massive deficit means more taxes, more inflation, and lower growth in the future,” adding, “Deficits are not a tool for growth; they are tools for stagnation.” 

Ahead of next week’s April CPI print, we outlined to pro-subs on Friday that traders should expect a “downside surprise” as the lagging OER “crashes” and catches up with real-time metrics. 

And now comes the April CPI “downside surprise” as OER crashes down to catch up with real time metricshttps://t.co/yRwuFen2e4

— zerohedge (@zerohedge) May 1, 2024

However, we’ll leave you with this from Dohmen Capital Research: “The Fed is being forced to step on the accelerator to enable the financing of the record deficits at the US Treasury. They know that is inflationary, but they have no alternative.”