An inversion of M2 and the CPI: a reliable recession signal

With the US' M2 growth decelerating sharply, as opposed to inflation, a significant recession should now be the major concern

Alongside the US delivering its second consecutive quarter of negative GDP growth in Q2 2022, another key event occurred—an inversion between M2 and the Consumer Price Index (CPI). Though it went largely unnoticed, this is an extremely important event. I define an inversion between the money supply and inflation as occurring when the year-on-year (YoY) …