"Growth"The growth of just moving in a perpetual range. A lot of people will tell you growth goes up. What if it's purely a function of liquidity and monetary supply?
USGDP trade ideas
Why The Fed Lowered Rates - My Opinion Part IThere has been a lot of speculation as to why the Fed lowered interest rates by 50bp.
My opinion is the Fed realized the pressure of a stronger US-Dollar and stronger US economy, headed into the POTUS election accompanied with new spending/policy related to a new POTUS, could put the global markets under extreme currency/economic pressures.
So, in order to provide more breathing room for the global economies, the US Fed decreased rates, taking a bit of pressure off currency rate divergences and allowing global central banks a bit of room to manage their economies against the 900-lb Gorilla (which is the US economy/US-Dollar).
In short, the US Fed needed to alleviate pressure put on the Global markets because of the 900-lb Gorilla US economy.
Not to save the US economy from an internal crisis...
But to save the world from a crisis of their own making. A Global Credit/Debt crisis has been brewing since before 2008.
The US Fed "gave in" and decided they had to decrease rates to reduce the risk of a foreign market contagion event (currencies/debt).
In my opinion, that is the only reason the Fed lowered rates.
Get some.
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China Is The Next JapanIn the 1980's, Japan was the ascendant global power.
Year after year, Japan's GDP grew, and it seemed like a foregone conclusion that the country would flip the USA in terms of economic output and political standing (as you can see from the chart above).
What happened next? Utter stagnation.
Demographic issues and a popping asset bubble led to issues that continue to this day, and the economy has never really been able to get off the ground in the last 30 years:
Today, the parallels with China are clear.
China is the new ascendant power.
However;
The country faces a credit crisis, an asset bubble, and demographic shifts that could lead to a massive period of stagnation for the world's second largest economy.
Will China fall behind?
Combined with other weakening economic data, it seems likely that the Chinese dream is over.
Here's the problem; China is an autocracy.
People have put up with a lack of freedoms due to the increasing quality of life.
What happens if that stops?
Thankfully, nobody knows what the future holds. That said, political instability seems likely.
As housing continues to worsen, we're worried about exposure to China from a big picture perspective:
Individually, the best ways to play this seem like puts on FXI, the largest concentrated Chinese mega cap bet. If the economy stagnates, we expect mega-caps will be hit accordingly:
Long puts on big companies like BABA and JD also seem like reasonable trades over the next few years as multiples come in.
Cheers!
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GDP & Money SupplyThe trajectory of global GDP & Money Supply keeps going up. The World's GDP was 103.86 trillion in 2022 and is forecasted for 112.6 trillion in 2023. As of Nov. 28, 2022, the total global value of the M2 money supply is $82.6 trillion.
Gross domestic product (GDP), is an estimate of the total value of goods and services produced in a country during a specified period, it is currently calculated yearly to understand the growth metrics of the country. The calculation is based on nominal GDP, also called GDP at current prices or in value. Countries by GDP is the single most indicator to capture economic activity of all the countries.
The largest economies and top 10 countries by GDP in the world are United States, China, Japan, Germany, India, United Kingdom, France, Canada, Russia & Brazil. The United States economy is the largest in the world, measured by nominal GDP, followed by China, the world's second largest with annual growth that consistently outpaces the United States. Below is the latest top 20 list of Countries by GDP, ranked as per the economic activity of each country in 2023.
Rank 2022 2023 2024
1 USA 25,035.164 26,185.210 27,057.202
2 China 18,321.197 19,243.974 20,699.148
3 Japan 4,300.621 4,365.976 4,568.729
4 Germany 4,031.149 4,120.242 4,337.385
5 India 3,468.566 3,820.573 4,170.220
6 UK 3,198.470 3,479.468 3,757.403
7 France 2,778.090 2,806.690 2,932.363
8 Canada 2,200.352 2,326.620 2,420.683
9 Russia 2,133.092 2,136.222 2,146.696
10 Brazil 1,894.708 2,059.443 2,200.916
11 Iran 1,973.738 2,044.152 2,135.731
12 Italy 1,996.934 1,991.008 2,059.410
13 South Korea 1,734.207 1,792.467 1,879.043
14 Australia 1,724.787 1,787.948 1,837.686
15 Mexico 1,424.533 1,476.407 1,527.077
16 Spain 1,389.927 1,421.012 1,508.902
17 Indonesia 1,289.429 1,388.683 1,506.988
18 Netherlands 990.583 1,019.762 1,076.955
19 Saudi Arabia 1,010.588 996.390 1,016.690
20 Turkey 853.487 941.551 1,037.858
(Source "populationu GDP List Updated Jan 2023 IMF gdp data in Oct 2022")
How Money Supply Is Measured:
M0: Referred to as the monetary base, M0 includes all the money in circulation, including money banks hold in reserve. According to the Federal Reserve, there was about $2.3 trillion in circulation as of January 2023.
M1: It includes all the M0 money supply, adding the money held in travelers’ checks, demand deposits, other types of checkable deposits and negotiable orders of withdrawal. As of January 2023, the seasonally adjusted stock of M1 totaled $19.64 trillion.
M2: It includes all of the currency from the M1 money supply, and expands to include mutual funds, smaller time deposits, money market securities and other types of time deposits. M2 currencies are usually less liquid than M1, meaning you can’t convert M2 money into cash as easily. The total stock of M2 was $21.27 trillion in January.
M3: It includes all the elements of M2, plus institutional money market funds and large time deposits. As compared to M1 and M2, M3 assets have the lowest liquidity. The Fed no longer calculates M3.
How Much Money Is in the World?
The total amount of money in the world can be measured and expressed in many different ways, so it’s difficult to give a specific answer.
If you’re curious about the total value of notes and coins in circulation, the Bank for International Settlements estimated it to be 8,275,000,000,000, or $8.28 trillion U.S. dollars, across 20 major countries plus the euro area in 2021, its most recent estimate. Of course, there are nearly 200 countries in the world, so this is just a rough estimate of the most narrowly defined — and perhaps easiest to quantify — category of money.
The global M1 supply, which includes all the money in circulation plus travelers checks and demand deposits like checking and savings accounts, was $48.9 trillion as of Nov. 28, 2022, according to Visual Capitalist. That publication estimated the total value of the M2 supply to be $82.6 trillion.
Money is also present in the form of investments and derivatives. The total market capitalization of just the New York Stock Exchange and Nasdaq is over 48,000,000,000,000 USD as of December 2022, according to Statista. The sum of Market Capitalization of Shanghai Stock Exchange and Market Capitalization of Shenzhen Stock Exchange accounted for 12,360,284,655,000 USD in March 2023. The total market cap of cryptocurrency, as reported by CoinMarketCap, adds another $1.16 trillion to that figure.
(Source "gobankingrates, By Scott Jeffries March 16, 2023")
