The law of conservation of the money supply is not a law. - page 10
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Depreciation of all currencies against the USD, this could be a sign of global currency devaluation. Everyone is printing money even faster than the US is printing USD. This is because it is profitable for exports to have cheaper national currencies. i.e. another bubble is being inflated, this time a currency bubble. Like any bubble, it will burst someday.
The exchange rate of currencies does not depend on the "amount of money" but on the supply and demand for it. >>Those currencies are going down, while the USD is going up, because many people are getting rid of their national currencies in order to buy the USD. For example, banks and other companies that are in debt to the U.S. and now need dollars to pay their debts.
Banks and other companies that have debts to the americans and they need dollars to pay those debts.
Therefore, there will be less money (Bucks) in the corporate accounts of those banks...
Demand and supply will also be seen by the amount of money. If there is an increase in the money supply, it will mean supply, inflation for that currency, etc...
If the money supply shrinks, it is revaluation... the exchange rate goes up :)
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Even if you calculate by weight based on the balances in the different Central Bank accounts, I doubt that anything can be achieved in the short term... >> it is good for the fundamental.
The exchange rate of currencies does not depend on the "amount of money", but on the supply and demand for them. Those currencies go down and the dollar goes up because many people get rid of their national currencies to buy the dollar. For example banks and other companies that are in debt to the Americans and need dollars to pay their debts.
These are all theoretical aspects described in books from half a century ago. Naturally it's all long out of date. A good and christamatic example, widely known, is the intervention of the Bank of Japan. A closer example, the actions of the Bank of Russia, with its currency corridor. The control mechanism in both cases is to change the money supply in the market. It takes very little to devalue, to print papers and buy up other currencies with them. Naturally, the system has some limitations, but in general it works. What demand/suggestion we can talk about in this case is absolutely unclear to me. By the way, those from Ukraine may see how it worked before, when their hryvnia was literally pegged to the dollar, think about what it was achieved with. And now that system is working as some people need it to.
The indices seem to behave in a more complex way. Don't you think?
Let us suppose that money supply is not a substance participating in a chemical reaction, and is not a constant. Thus, by effectively managing money supply, we can effectively manage crises in the economy, including the global economy, in order to capture it. The shortage of money in the favorite states on the eve of all their crises is the best proof of it. Second assumption is that we do not really care how to earn money as long as we do not put bricks in the cold. Then the way you suggest can predict the current recession and make money on stock and futures markets. It was also interesting to know your opinion on the end of recession especially with indicator confirmation.
To sum up :
Signs of a monetary contraction and therefore the beginning of machinations.
1 Interest rate increase especially in the USA.
2 Volatility increase on forex.
3. rising volatility in stock markets.
4........................................
5........................................
Sign of end of recession .
1 Decline in volatility in stock markets, breakout of the sidewall .
2 HZ.
3 HZ.
...
Not so long ago I read the analytical article "At the edge of the financial abyss" by Kalita Finance analyst D. Golubovsky. I enjoyed the level of his competence and even learned something new. So he explains the mechanics of the processes that are now taking place in the world economy and finance, as well as the phenomenon of money supply reduction. If you're interested, look at his page, there are links to all 4 parts of this article: http://kf-news.ru/category/kolonka
The article is interesting. The political stuff is of course nonsense, but the economic part is interesting. At least it is clear that the banks are being written off for billions of dollars in losses, all banks.
It turns out that in fact they kept in their accounts paper with an arbitrarily drawn number of zeros, not money. And when the paper became illiquid and devalued, they had to write it off.
I kept thinking: how can it be so? It is impossible for everyone to have losses. If one makes a loss, the other will make a profit. Money is not burned in the furnace.
So it is not money, but paper that burns.
If we assume that the foreign exchange market is a closed system, i.e. money does not come from "nowhere" and does not disappear into "nowhere", then we can expect the effect of money supply overflow (redistribution of funds). In order to be able to compare different instruments with one another, we normalize each of them by its price, say, as of January 1, 2008. Then we will obtain a fan coming from point 1. and, as a first approximation, diffunding in the relative price space as a one-dimensional Brownian process:
Fig. shows the relative 1H prices for the first fifteen pairs of Alpari DCs from 2.01.2008 to now. You can clearly see the beginning of the crisis, which is marked by an explosive increase in the volatility of all instruments (from about 4000 bars). If my assumption of continued feminine mass is correct, then we are entitled to expect the sum of all relative prices to "trample on the spot" within one. Indeed, "...if there is a loss somewhere, there must surely be a gain somewhere else...". Let's see the amount for 33 instruments:
Figvam - as they say. With the start of the crisis, the money supply has decreased by 10%. How about that!
Attention. Question: Where did the money go?
Another interesting point. Let`s take two outermost mirror instruments, in this case it is EURAUD and AUDJPY (last thousand bars of 1H). We can see that these pairs have a correlation coefficient close to -1, which indicates a strong negative relation between them.
Until now I was sure that all else being equal, the instrument price can grow enormously, but it can only fall to zero (and that is impossible). I.e., if you find two mirror pairs and open them by weighted volumes in different directions, the rising pair should supposedly win. Realistically, no such thing is observed.
Interesting this.
"money supply"
EURJPY_H4
if you use 28 currency pairs instead of 33 when calculating "money supply", the charts should be 100% coincident. didn't check it, IMHO.
The 28 pairs are 8 major currencies, where the euro is always bought against the others and the yen is always sold.