How Do You Spell Contraction? M-O-N-E-Y (Velocity Of Bank Credit Crashes As Manufacturing PMI Sinks To Contraction)

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How do you spell contraction? M-O-N-E-Y!

Take a look at this chart of real GDP YoY / Bank Credit YoY on the left axis and M2 Money growth on the right axis. I call this the velocity of bank credit. And it is sucking wind! Crashing to -13 in Q3.

Then we have US manufacturing PMI saw only two months in 2023 that were not in contraction and ended on a decidedly poor note with the final December print dropping to 47.9 (from 48.2 flash and 49.4 prior).

Source: Bloomberg

Across the board it was ugly with:

  • Renewed contraction in output as orders fall at sharper pace
  • Rates of inflation pick up
  • Joint-fastest drop in employment since June 2020

How bad is Biden’s fiscal policy? US interest payments on our bloated Federal debt is now higher than defense spending. Biden isn’t tuff enough to moderate spending or the border invasion.

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