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Global Interest Rates Pressured by Major Decline in Monetary Base

InfraCap Weekly Commentary: Global Interest Rates Pressured by Major Decline in Monetary Base

InfraCap Exclusive Report, New York, NY ~ The Global Monetary Base [GMB] (click here for InfraCap data report) continued to decline significantly in September with a $288 billion dollar decline. This wrapped up a total decline of 4.2% over the last two quarters, representing almost a $1 trillion reduction in global liquidity.

The Global Monetary Base is a critical leading indicator of inflation/deflation and a driver of global stock and bond prices. The 35% increase in the Global Monetary Base ($7.3 Trillion) during the first year of the Pandemic was the driver of the liquidity-driven increase in stock and bond prices during 2021. It was also the key driver of the first double-digit inflation in the US since the 1970s. That liquidity bubble burst over the last 18 months with the Global Monetary Base declining 7% representing a $1.8 Trillion liquidity decline. This decline accelerated dramatically at the end of the 2nd Quarter of 2023 with the ECB reducing global liquidity by over $500 billion in a single week. This decline coincided with the beginning of the explosion in long-term interest rates across the globe.

We at InfraCap continue to project that the decline in the Global Monetary Base will stabilize over the next few months of 2023. We expect the GMB will start growing again in early 2024 as the ECB [European Central Bank] and the PBOC [Peoples Bank of China] will be forced to ease monetary policy in response to a recession in Europe and slow growth in China. In fact, the Euro Zone GDP Now-Cast for 3rd quarter GDP came in as negative .3%. The Now-Cast data indicates a mild recession is underway due to the ultra-tight ECB monetary policy.

If the Global Monetary Base can indeed stabilize in 4th Quarter 2023, we expect global interest rates to also stabilize this year and then decline in 2024. Declining global interest rates should then support the global stock and bond markets.



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