Ways to reduce money supply?

[ThisDinosaur]

What are some practical applications of this knowledge?

1)Ignore any expert who talks about money on the sidelines
2)Ignore the Fed
3)Prepare for inflation only when government increases spending on entitlements/defense, (but not if you think government spending will increase actual productivity)
4)Invest mainly in productive real assets, instead of paper and debt.

What else?

[jacob]

"Money on the side-lines" makes a lot of sense if one (certain experts) are focused on the flow-aspect of the markets instead of the stock-aspect (and by that I'm not talking about stock=equity). https://en.wikipedia.org/wiki/Stock-Flo ... tent_model ... It was a very useful concept in 2008 for example. The "money-on-the-side-lines" bucket would be credit (cash and lines) that are instantly handy and NOT subject to margin-calls.

I don't think such knowledge would have results that could be defined as an app. However, knowing what's going on under the hood could significantly influence the way one interfaces/interacts with the beast. Compare to driving a car which is the [only?] complex system most are familiar with. It's a pedal to speed up + a pedal to slow down + a wheel to turn left or right ... but if you understand how these levers are connected to actual reality, you'll probably be a better driver (and less likely to destroy your vehicle).

[Dragline]

What are some practical applications of this knowledge?

1)Ignore any expert who talks about money on the sidelines
2)Ignore the Fed
3)Prepare for inflation only when government increases spending on entitlements/defense, (but not if you think government spending will increase actual productivity)
4)Invest mainly in productive real assets, instead of paper and debt.

What else?

I'd agree with 1 and partially with 2 (don't get too excited about 2, because the financial markets bake it in almost instantaneously) but not 3 or 4 necessarily -- its better to own some of everything.

The main thing people miss from these discussions are:

(1) the condition of the economy at a given point in time is less about the quantity of money in the system and more about the flow of it. The velocity of money matters. A lot. And there is no good way of predicting it, although it doesn't seem to change very quickly.

(2) in terms of "how the market is going to do next, whether there will be a crash, etc.", it is the expansion or contraction of debt in the PRIVATE sector that is usually the key determinant -- not governmental/public debt. This is why pundits are continuously wrong about when the shit will hit the fan -- if you do not consider what is happening with private debt/credit, you'll never be accurate, because your model is missing a giant piece. The government can always print money and have the Fed buy its bonds, but private actors are constrained and can go belly up when they make mistakes -- and they inevitably do. The crisis of 2008 was a massive contraction of debt in the private sector that was then bailed out by the public sector.

But since private debt expansion/contraction is much more difficult to measure than public debt, its less easy to point to a number and discuss it. Public data is easy to find, easy to argue about, but less significant in "what's going to happen next".