How a Digital Currency Allows Central Banks to Overshoot More Easily

[Inside Wall Street with Nomi Prins]( Welcome to Inside Wall Street with Nomi Prins! It’s the only daily newsletter featuring the insights of renowned author and former Wall Street insider, Nomi Prins. Every day, Nomi shines a light on a massive wealth transfer she calls The Great Distortion. That’s the true cause of the permanent disconnect she sees between the markets and the real economy. And she shares ways you can come out ahead, if you know where the money is flowing. You’ll find all Nomi’s Inside Wall Street issues [here](. If you have questions or comments, send Nomi a note anytime [here]( or at feedback@rogueeconomics.com. How a Digital Currency Allows Central Banks to Overshoot More Easily By Nomi Prins, Editor, Inside Wall Street with Nomi Prins Welcome to our Friday mailbag edition! Every week, we receive fantastic questions from your fellow readers. And every Friday, I answer as many as I can. Up first today, a question from reader Richard on the U.S. money supply… It is my understanding the money supply is low. What does that mean to the markets, and what forces/actions will cause it to increase? – Richard S. Hi Richard, that’s a great question. You are correct, with one tweak – money supply growth is slow. Money supply itself remains quite high by historical standards. Take a look at the two graphs below. The first shows a more historical perspective. The second shows how there’s been a dip in money supply since the Fed began raising rates last March. Recommended Link [Best stock to buy in a bear market]( [image]( Investment expert Brad Thomas knows how to pick stocks. He bought Starbucks back in 2006… He bought Nike in 2003… And he and his team delivered a perfect track record from March 2020 to September 2022. Now, for a limited time, he’s revealing his #1 stock for 2023… [Get its name here.]( -- The total money supply, or what’s referred to as M2, includes M1 (money that’s really liquid such as cash, checking deposits, and traveler's checks), plus money that’s less liquid such as certificates of deposits and money market funds. In a nutshell, what that means is that as the Fed has been raising rates, people are actually keeping less money in banks and short-term investments. In other words, they are spending it because things are costing more. In fact, the U.S. savings rate hit a 17-year low at the end of last year (although it’s increased a little into the start of this year). [Featured: Must See! Florida Dad “hacks” gas pump. What happens next will STUN you…]( For the markets, less money in circulation has also coincided with less investing, which is one reason markets have dropped in tandem with the Fed’s rate hikes. The reason some of this changed in January is because the market expected the Fed to fully pivot (to cut rates, or in our terms, get to Stage 3 of its [3-stage pivot]( more quickly as a result of certain lower inflation data. Yet, subsequent inflation data has made the markets think twice about this and that’s why they have fallen recently. Money supply will increase once the Fed does fully pivot to cutting rates or even buying more bonds in the form of quantitative easing (QE). And in the wake of the recent banking crisis and the next Fed meeting scheduled for next week on March 21, we have yet to see how the Fed will proceed with rate hikes. Recommended Link [Silicon Valley, Signature Banks’ Collapse – Could your bank be next?]( [image]( Silicon Valley Bank was the second-largest bank collapse in history. Second only to Washington Mutual when it went under in 2008. Then Signature Bank of NY was taken over by regulators. Making it the second massive bank failure in 3 days. These events beg the question: Is your bank safe? [Is your money safe?]( With all that’s been going on, former Goldman Sachs executive Dr. Nomi Prins used to think a crash was inevitable. One that could wipe out the savings of investors, seniors and retirees. She still believes there is going to be an economic crisis. Just not the kind of crisis most people expect. [Read the full story here.]( P.S. We’re on the brink of the greatest transfer of wealth in American history. It’s a complete transformation of America using the financial system as a tool for change. [Find out more here.]( -- Either way, when inflation decreases, more money will be in financial instruments as opposed to purchasing things. [Chart] [Chart] Next, reader John wants to know about the implications of a central bank digital currency (CBDC)… What are your thoughts on the effects of the upcoming central bank digital currency with regard to inflation, the market, and the U.S. economy? – John G. Hi John, that’s a terrific question. And it’s one that we’ll devote a number of full essays to over the months and years to come. The short answer: having a CBDC won’t impact the supply chain, the cost of getting goods from point A to point B (and the fuel to do so), the cost of eggs, or how much a babysitter might charge per hour. [Featured: Strange Force Coming for American’s Savings? (Prepare Now)]( However, once fully done and dusted, a CBDC does offer a central bank, take the Fed, the ability to create money and disperse it even more quickly than it can with non-digital fiat currency. What that means is that when the Fed deems it necessary to help the financial system again, it can overshoot easily. In terms of the economy and markets, the Fed will have another mode to digitally print money that can cause more monetary inflation. This has the potential to reduce the buying power of the dollar or make your money not stretch as far. 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If I didn’t get to your question this week, look out for my response in a future Friday mailbag edition. I do my best to respond to as many of your questions and comments as I can. Just remember, I can’t give personal investment advice. And if there are any other topics you’d like me to write about, I’d love to hear from you. You can write me at feedback@rogueeconomics.com. Happy investing… and have a fantastic weekend! Regards, [signature] Nomi Prins Editor, Inside Wall Street with Nomi Prins IN CASE YOU MISSED IT… [Trader Nails 12 “Double Your Money” Winners in 2022? 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