The law of conservation of the money supply is not a law.
Why only 33 pairs?
Actually, there are 169 currencies and 4 metals in the world.
I.e. we have to take into account:
169 x 169 - 169 + 4 = 28396 instruments (currency pairs + metals).
Or at least 169 currencies and 4 metals, if you know how to count indexes.
You also have to take into account the constant issuance.
That's what was at hand - 33 pairs in total. Of course, it would be good to analyse the whole volume of instruments. But you should agree that 33 instruments is a small sample. And something tells me that the obtained result most likely would not change much for the limiting case... Someone or something is withdrawing money from forex! Or moving it into metals... That's just my intuitive way of thinking.
33 of 28396 is 0.116%.
Or
7 of 169 is 4,142%.
Hi Sergei !
As you of course know yourself, the currency market is not a closed system and even such an assumption is impossible. Not because it is too crude, but because in a closed system any movement would quickly stop.
But your result about the money supply shrinking is super! It really is. But even among economists few understand this. But, fortunately, there are still intelligent people, and some of them are politically unbiased. And it is a prerequisite if one wants to hear an unbiased analysis.
Not so long ago I read an 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 are interested, check out his page, there are links to all 4 parts of this article: http://kf-news.ru/category/kolonka
It seems to me that using only one price is not enough, like the law of conservation of momentum - speed multiplied by mass, and here - price multiplied by the "power" of the currency's influence on the world economy.
Hi Sergei !
As you of course know yourself, the currency market is not a closed system and even such an assumption is impossible. Not because it is too crude, but because in a closed system any movement would quickly stop.
But your result about the money supply shrinking is super! It really is. But even among economists few understand this. But, fortunately, smart people are still around, and some of them are politically unbiased. And it is a prerequisite if one wants to hear an unbiased analysis.
Not so long ago I read an 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, and at the same time the phenomenon of money supply reduction. If you are interested, check out his page, there are links to all 4 parts of this article: http://kf-news.ru/category/kolonka
I can't find his machine to count all the money in the world in the article. And who gave him such an opportunity.
There are many explanations these days. Everywhere the essence is the same. A mismatch between market and real asset prices. Whatever they want, they quote. This has always been the case.
Somehow, I couldn't find in the article where he has a machine to count all the money in the world. And who gave him that opportunity.
There are a lot of explanations these days. They're all the same. A discrepancy between market and real asset prices. Whatever they want, they quote. Always has been.
Apparently, 13 minutes was not enough time to read this article after all. And since "the bottom line is the same everywhere" there is no need to bother.
All the more reason not to stoop to the level of primitive thinking. "The machine", "who gave him...", "explanations" and so on - leave it to the schoolboys.
In order to be able to compare the different instruments, we normalize each of them by their price, say, on January 1, 2008. Then we obtain a fan, coming from point 1. and, as a first approximation, diverging in the relative price space as a one-dimensional Brownian process:
The question is what and how you normalise.
If you are calling the price of an instrument the conversion rate, then that is incorrect.
Neutron, well, you should probably not take the arithmetic average, but the geometric average.
Then in addition to the money market we should also take into account the stock market, the commodity market, and the bond market. In the latter the money seems to have flowed.
And, remembering the movie "Zeitgeist", the contraction of the money supply happened in other crises too (the depression of the 30's in America, for example), made them worse, ruined thousands of poor banks, bought up big ones and contributed to globalization.
So the scenario is run-of-the-mill, the historical experience is there, and getting out of the crisis quickly is not exactly the goal of people who have the power to influence events.
PS. Zeitgeist - in the original "Zeitgeist".
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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, let us normalize each of them to its price, say, as of January 1, 2008. Then we will obtain a fan coming from point 1. and, as a first approximation, diverging 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.