Speaking of Bad Economic News

Real declines in March and April


Biggest drop in over 15 years



Correlation with recessions

The real money supply has declined sharply, which is yet another indication of an oncoming recession.

The short version is that economic activity creates money, through things like loans and the like. 

Think of banking, where, if you need to hold 10% in reserve, $100 in the bank can allow you to make $90 in loans, and so there is actually $190 out there as a result.

In this case, both M1 (money readily available for spending, cash, bank deposits, etc/) and M2 (M1+ things like time deposits which might require a few months to get one's hands on).

Both are falling, and this indicates a drop in economic activity.

Essentially, M1 and M2 are an indication of the velocity of money, and if the velocity of money is decreasing, economic activity is decreasing.

The "Real" bit means inflation adjusted.

As Bondad notes (see link), "Real money supply is a long leading indicator, as shown in the below graph of both real M1 and real M2 going back over 60 years."

This will not be pretty.