Charts

Get a visual representation of deflation in action. Please tap a market from the list to view charts.

Money And Credit Index (MACI)

Our Money And Credit Index for each country takes the data from money supply and debt, both public and private, to create an index. We then track the annualized rate of change of that index to examine whether money and credit, as a whole, is inflating or deflating.

United States of America
United Kingdom
Germany Money and Credit Index
Japan Money and Credit Index

US Monetary Indicators

Effective Federal Funds Rate

Effective Federal Funds Rate is the interest rate at which depository institutions (commercial banks) swap federal funds (balances held at Federal Reserve Banks) with each other overnight. When a depository institution has surplus balances in its reserve account, it lends to other banks in need of larger balances. In simpler terms, a bank with excess cash, which is often referred to as liquidity, will lend to another bank that needs to quickly raise liquidity.

The federal funds rate is the central interest rate in the U.S. financial market. It influences other interest rates such as the prime rate, which is the rate banks charge their customers with higher credit ratings, mortgages, loans and savings.

Bank Prime Loan Rate

Bank Loan Prime Rate is the interest rate that commercial banks charge their most creditworthy corporate customers.

Monetary Base

Monetary Base is the sum of currency (including coin) in circulation outside Federal Reserve Banks and the U.S. Treasury, plus deposits held by depository institutions at Federal Reserve Banks. It represents the total amount of a currency that is either in general circulation in the hands of the public or in the commercial bank deposits held in the central bank’s reserves.

The Monetary Base, being mainly commercial bank money held at the Federal Reserve, is the purest measurement of how much money the Fed is creating out of thin air. If the Fed wants to try and shore up the economy it increases the Monetary Base, giving commercial banks more money (reserves) from which they can create other forms of money and credit via loans.

A declining Monetary Base constitutes deflation.

Personal Saving Rate

Personal Saving Rate is the ratio of personal saving to disposable personal income. Personal saving is equal to personal income minus personal outlays and personal taxes. It can be viewed as money that could be used either to provide funds to capital markets or to invest in real assets such as residences. Therefore, a low personal saving rate is a sign of a positive social mood and exuberance in the economy.

On the other hand, a high personal saving rate is a sign of a negative social mood and worry over the economy. A high personal saving rate would normally occur in deflation because people hoard cash.

Total Public Debt

USA Total Public Debt is the sum of all outstanding debt owed by the federal government. About two-thirds is debt held by the public. The government owes this to buyers of U.S. Treasury bills, notes, and bonds, including individuals, companies, and foreign governments. The remaining third is intra-governmental debt, where the Treasury owes this debt to its various departments who hold government account securities, such as the Social Security fund.

Total Public Debt of GDP

This is the Total Public Debt as a percentage of Gross Domestic Product. When the amount of debt becomes greater than economic output it starts to become a problem. The higher the ratio becomes, the more unsustainable it is. Note, though, that when deflation starts the economy contracts and so the ratio normally spikes higher first before gradually declining as debt is deflated.

Real Median Household Income

Real Median Household Income is the level of household income in the U.S. where, adjusted for consumer price inflation, half of all households have income above that level and half have income below.

It generally follows the business cycle, so a high reading will usually accompany a top in the economy and a low reading will accompany a bottom.

M1 Money Stock

M1 Money Stock is a measurement of the funds that are readily accessible for spending. M1 consists of: (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) traveler’s checks of nonbank issuers; (3) demand deposits; and (4) other checkable deposits, which consist primarily of negotiable order of withdrawal accounts at depository institutions and credit union share draft accounts.

A declining M1 constitutes deflation.

M2 Money Stock

M2 Money Stock is a broader measurement of financial assets held principally by households. M2 consists of M1 plus: (1) savings deposits (which include money market deposit accounts); (2) small-denomination time deposits (time deposits in amounts of less than $100,000); and (3) balances in retail money market mutual funds.

A declining M2 constitutes deflation.

M2 Velocity

M2 Velocity is a ratio of nominal Gross Domestic Product (GDP) to a measure of the money supply, in this case M2. It can be thought of as the rate of turnover in the money supply (the number of times one dollar is used to purchase final goods and services included in GDP). When M2 Velocity is declining it reflects an underlying weakness in the economy and declining velocity is usually a forerunner before a deflationary period.

Credit

Bonds are examined by agencies and are given a rating ranging from AAA (the highest quality) to D (when a bond is in default). Examining the difference in yield between bonds of different credit ratings can be insightful. When the credit cycle is positive for the economy, the yield on lower quality rated bonds should narrow relative to those of higher quality. The opposite happens when the credit cycle is turning negative.

Corporate Yield

EM Corporate

This chart represents the yield of an index of corporate bonds denominated in U.S. dollars from Emerging Markets. This debt is considered to be some of the riskiest, and so the yield acts as a good indicator of general sentiment towards Emerging Markets as well as the global economy.

US Investment Grade Corporate

“Investment Grade” bonds are those that are rated above a threshold, below which bonds are considered junk. This chart shows the yield of an index of Investment Grade U.S. corporate bonds denominated in U.S. dollars.

The difference between Investment Grade and High Yield (junk) bonds is important because many funds are not allowed to invest in junk bonds.

US High Yield Corporate

High Yield or “Junk” bonds are those that are rated the riskiest. This chart shows the yield of an index of High Yield U.S. corporate bonds denominated in U.S. dollars.

US AAA Rated

This chart shows the ICE BofA AAA U.S. Corporate Index Effective Yield (U.S. dollar denominated). Bonds in this index are rated triple-A and are considered to be the safest sector of corporate debt.

US AA Rated

This chart shows the ICE BofA AA U.S. Corporate Index Effective Yield (U.S. dollar denominated). Bonds in this index are rated double-A.

US A Rated

This chart shows the ICE BofA Single-A U.S. Corporate Index Effective Yield (U.S. dollar denominated). Bonds in this index are rated single-A.

US BBB Rated

This chart shows the ICE BofA BBB U.S. Corporate Index Effective Yield (U.S. dollar denominated). Bonds in this index are rated triple-B. This is the lowest rating possible for bonds to be considered “Investment Grade”.

US B Rated

This chart shows the ICE BofA Single-B U.S. Corporate Index Effective Yield (U.S. dollar denominated). Bonds in this index are rated single-B and are considered to be junk, albeit on the higher quality end of that category.

US CCC Rated

This chart shows the ICE BofA CCC & Lower U.S. Corporate Index Effective Yield (U.S. dollar denominated). Bonds in this index are rated triple-C or lower, and are considered to be the riskiest of all corporate debt.

Consumer Prices

Each country has an index of consumer prices, made up from a basket of goods and services traded in the economy. The annual percentage change in the index is what most people think of as inflation when it is above zero, and deflation when it is below zero. Strictly speaking, this should be called PRICE inflation or deflation. The proper definition of inflation or deflation refers to the MONETARY side. That is, an expansion or contraction in the amount of money and credit in an economy.

Nevertheless, there is often a link between monetary and price deflation, so monitoring the annual percentage change in consumer prices is useful.

G10

U.S.

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China

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Canada

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France

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Germany

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Italy

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Japan

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Switzerland

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U.K.

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Australia

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Emerging Markets

Greece

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South Africa

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Venezuela
India