2023-10-04
A round a month ago, I authored a paper and recently published it on Substack. After some additional research, I've come across several charts that provide further support for my thesis. While my original plan was to revisit this topic and provide an update in approximately 3-4 months, I'm now considering whether it would be fair to share this new evidence with my readers sooner. If you haven't had a chance to read my previous paper, I encourage you to do so.
The total global bond value has been a topic of concern lately, experiencing a subsitential decline over the past two years. This is particularly worrisome because these bonds are often considered "risk-free" assets that serve as the foundation for collateral within the entire financial system.
While the U.S. government has experienced significant financial challenges in 1862, 1933, 1968, and 1971, it's worth noting that these instances are not classified as defaults on their treasuries. In reality, the primary concern lies in the risk of devaluation rather than non-payment.
Even if you were to receive your principal and concurrent yield in full, the prospect of default or devaluation of these government bonds could still result in substantial real negative returns as shown in the chart below.
It's worth noting that the US M2 money supply has recently shown a decline, marking the first time it has gone negative. Additionally, some argue that a more accurate metric for defining money supply, the Rothbard-Salerno money supply measure, has also gone negative for the first time since February 1989. This highlights a significant shift in the monetary landscape.
The total number of employees in the truck transportation industry serves as a remarkably insightful indicator for predicting economic recessions when it experiences a decline. This phenomenon underscores the critical role that this sector plays in the broader economy, as a slowdown in trucking employment can signify decreased demand for the movement of goods, reduced consumer spending, and potential economic contraction. Therefore, monitoring employment trends in the trucking industry has proven to be a valuable tool in identifying early warning signs of economic downturns
Thanks
Finn