Financial safety

The global supply of money has stopped growing for the first time in years, and a prominent economist is convinced it’s created an 80% chance of recession

To the apprehension of several market experts, a key gauge of the global supply of money has stopped growing. It's the global monetary base, defined as the sum of currency in circulation, as well as deposits that banks and other depository institutions hold with the Federal Reserve. This gauge matters to market participants because it reflects just how tight central bank policy is. And tighter policy curtails the flow of money. For an example of just how much this matters to investors, think back to the stock market's correction late last year, when it looked like the Fed was going full steam ahead with four rate hikes in 2019. The Fed has since backpedaled on those plans, much to the delight of equity investors. Multiple Fed officials have also said the central bank could stop trimming its balance sheet later this year. But this U-turn has not been enough to clear the risks that tighter money supply pose, according to market experts including David Rosenberg, the chief economist at Gluskin Sheff. "Global liquidity conditions have tightened dramatically on the back of either tighter or less accommodative central bank policies," Rosenberg said in his contribution to Business Insider's "most important charts" feature.