June 2024 - Capital Market Journal

How many forms of Money do exist ? Why Money Supply & Business Cycle Determine Inflation #economy

00:00:42 – What Inflation Really Is (Not Just Price Changes)
Inflation = loss of purchasing power; the intrinsic value of currency diminishes.
00:01:34 – Three Types of Money
Commodity money, fiscal money, financial ...money – and why they all matter.
00:02:58 – Financial Friction Defined (Simplified)
The inefficiency between deposit rates and borrowing rates – the banks' profit margin.
00:03:45 – Agency Costs & Credit Risk
Why banks factor in default risk and how it affects borrowing costs.
00:05:47 – The Toblerone Example: Purchasing Power in Practice
One pound 10 years ago ≠ one pound today – you now need three coins for the same chocolate.
00:08:49 – Affordability & Substitution
When prices rise, consumers switch to cheaper alternatives – that's the real cost of living.
00:09:40 – Credit Creation & The Debt Cycle
Borrowing to consume keeps the system running – but at what cost?
00:11:54 – Bank Reserves: The "Financial" Form of Money
Bank reserves are digital money that never touches the real economy – they settle interbank payments.
00:14:49 – Four Forms of Money (Bank Reserves, Fiscal, Deposits, Cash)
All are "pounds" but serve completely different purposes in the economy.
00:19:43 – Money Supply & Intrinsic Value
More money supply = lower purchasing power; money creation for speculation inflates assets, not just goods.
00:23:44 – Boom & Bust Cycles
Inflating money supply drives stock prices up; when they crash, we're left with unpayable debt.
00:26:04 – Money Supply Destroyed in Asset Bubbles
When house prices or stocks fall, the money used to buy them is effectively "destroyed."
00:27:53 – Prices Almost Never Go Down
Inflation is structural – prices are "sticky" upward; you rarely get a discount.
00:28:54 – Statistical Distributions of Inflation (Not Normal!)
Inflation data is positively skewed with fat tails – not a bell curve.
00:33:25 – Hurst Coefficient & Price Jump Persistence
Price jumps have memory – they persist and happen more often than random chance would suggest.
00:35:43 – Cumulative Price Increases (1989–2026)
CPI total increase = 183% (≈5% per year average); Core CPI = 151% (≈4% per year); Housing services = 327% (≈8.8% per year); Utilities = 447% (≈12.8% per year).
00:40:50 – The 2% Target Is a Myth
The Bank of England's 2% target has never been achieved in 37 years of data.
00:41:24 – Short-Term Shocks Are Increasing in Frequency
Monthly dispersion has crossed above the 12-month average – volatility is rising.
00:43:43 – The Core Equation: GDP Growth vs. Money Supply Growth
If money supply grows faster than GDP, the currency depreciates – that's the engine of inflation.
00:46:35 – The Banks' Profit Equation
Profit = (borrower rate × lending) – (depositor rate × deposits) – agency costs. This requires inflation to work.
00:50:58 – The Government's Fiscal Money & Taxation
Public spending is always designed to be recouped through taxes – it's not "free money."
00:55:12 – Why Private Sector Business Is Better Than Government Spending
Business creates value, jobs, and meaning – government spending always comes with tax strings attached.
00:57:54 – Freedom, Natural Rights, & The State
The state must justify its interference; citizens don't need to justify their rights.
00:59:56 – Fourier Transform & Business Cycle Lengths
Using signal processing to find dominant cycles: CPI cycle ≈18.8 years; energy prices cycle ≈5.4 years.
1:05:38 – Cyclical Forecast: What's Next?
The current trough has bottomed – inflation is expected to rise cyclically into 2028, then turn deflationary.
1:09:50 – Amplitude Spectrum & Harmonic Analysis
Visual breakdown of multiple sine waves (cycles) within inflation data.
1:11:26 – Peak Forecast: August 2028
Second peak in the inflation cycle expected around mid-2028.
1:14:45 – Deflationary Trough After 2028?
After the 2028 peak, the cycle may turn negative – deflation or a crash in asset prices.
1:15:40 – Central Banks Should Buy Bonds at Market Yield
Instead of cutting rates to zero, central banks should support the yield curve by buying bonds at current yields.
1:19:26 – Nowcast Scenarios (Oil Price Shocks)
Moderate oil price spike ($90–100/barrel) → CPI ≈2.6–3.3%; severe spike → CPI could hit 4%.
1:23:32 – Bank of England Research Model (Bruneau & Feifer)
Structural shocks (energy, supply, demand, monetary) – energy shocks have the largest volatility.
1:24:36 – Final Nowcast Summary
Most credible range: CPI 3.0–3.6%; RPI petrol nowcast ≈20% (down from 29%); broader inflation trending toward 3%.
1:25:53 – Credit Creation Data (First Half 2026)
Net consumer credit grew by ~£9–10 billion in H1 2026 – accelerating money supply chasing goods = higher prices.Show More

How many forms of Money do exist ? Why Money Supply & Business Cycle Determine Inflation #economy

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