The amount of dollars in circulation has grown by 65% since last February. The number of transactions in the economy has decreased this year, according to Bent.
Much of the dollars that the US Federal Reserve issued this year is going directly to large corporations rather than citizens, says Marty Bent. The author of the daily Bitcoin newsletter “Marty’s Bent” and host of the podcast “Tales from the Crypt” recently said that US citizens “are experiencing the biggest heist in history.”
Bent supports that information with official data on the monetary issue from the Federal Reserve of Saint Louis. This source shows that this year there has been almost vertical growth, as well as a decrease in economic activity and an upward rebound in indexes such as the S&P 500.
Through a graph that Sven Henrich (@NorthmanTrader) shared on Twitter, Bent shows the growth in the money supply (M1) in the United States, which has grown by 55% since February. To emphasize the magnitude of the money printed this year, Bent says that the printing of 35% of all existing dollars has occurred in the past 10 months.
The graph shows that there was sustained growth in supply over the years. However, there was a marked change in the slope in 2020 since the money supply went from USD 4 trillion to almost USD 6.4 trillion. In other words, there was an increase in the year equivalent to that which occurred in the period between 2014 and 2019.
On another graph that Sven Henrich proposes, the money-issuance curve overlaps with the rise of the S&P 500 index.
According to Bent, what people “are seeing is a massive transfer of wealth from the poor to the rich in real-time.” He says that the people who had to stay home without being able to open their businesses and received a check for USD 1,200 in March “are not benefiting from the profits” that the stock market has generated. Also, he considers that “the kleptocrats in power are bleeding the most vulnerable, actively preventing them from counterattacking, by keeping them confined in the name of science.
Bent continues with the contrast of the other two charts: the rise of money M2, which includes M1 plus savings deposits, and the decrease in the speed of money.
The Saint Louis Federal Reserve explains that this last parameter is a measure of the dynamism of the economy since the speed of money determines the number of times a dollar changes hands on average.
This agency notes that the speed of money tends to decrease during recessions, since the number of transactions in an economy decrease. Consumers tend to save more and businesses tend to invest less, that is, people hoard cash instead of spending it.
Added to the above reasons are the massive printing of money, the increase in the value of large corporations, and the noticeable decrease in economic activity. All this has led to large corporations, rather than the economy as a whole, receiving a significant amount of the aid according to Bent.
According to the 2020 employment index curve, there has been a deficit of almost 15% at its lowest point, three times lower than in the worst scenarios in recent history: falls of 5% in 1948 and 6% in 2007, respectively.
The Federal Reserve anticipates that the US economy will worsen, given that there was the worst quarterly contraction (-32.9%) in gross domestic product during the second semester. This has been the largest quarterly decrease since the Bureau of Economic Analysis (BEA) began its records in 1947.
The massive printing of money, in addition
to the freezing of interest rates near zero, prompted investors to move towards safe-haven assets against inflation. This flow of capital especially benefited gold and Bitcoin, with the latter having an advantage against the US dollar.
Numerous institutional investors, who had not entered cryptocurrencies as a means of diversifying their investments, have shown interest in Bitcoin. That situation gave way to an upward cycle for this cryptocurrency, which recently exceeded the USD 20,000 mark for the first time.
By Alexander Salazar
