Here is a summary of Dr Lacy Hunt's work on the cause of the record rate of decline in World Liquidity.


The Second Theorem: Monetary deceleration eventually lead to lower, not higher, interest rates as originally theorized by Milton Friedman.

When the Fed makes changes to the monetary base, they have an impact domestically and they have an impact globally.

Another Consequence of Fed Tightening: The Yield Spread

  • There has been a massive flattening – we’ve had 17 flattening cycles and 17 recessions.
  • Note that an actual inversion is not necessary. It only occurred in 10 of the 17 recessions.
  • When the yield curve is flat, banks typically charge less to riskier clients, making them more vulnerable to the next downturn.

World Dollar Liquidity

  • The Fed created more liquidity on the global markets than they did on the domestic market.
  • The Fed played a major role in allowing the rest of the world to get into deeper debt.
  • World dollar liquidity is now declining at a record rate.
  • This is a classic example of creating a policy without knowing the consequences.

If I am right, next liquidity injection by China will have a fleeting effect.

  • One other important element here – it is not just money, it is the velocity of money. It is turning over 1.4 times in U.S. but only 1 time…
  • Which means monetary policy is even more diluted in China, Japan and Europe.

We now have a synchronized downturn everywhere.

Perhaps the most important evidence is the decline in World Trade Volume.

  • We are now declining at a level equal to the last two recessions.
  • We are seeing it in all the indicators but the best one of all is global trade.





SOURCE: 05-19-19 - - "Lacy Hunt: This Is One Of The Most Important Charts In Economics"

All Originally Sourced from FULL PRESENTATION by Dr Lacy Hunt at the Mauldin Strategic Investment Conference:

On My Radar: Mauldin Strategic Investment Conference 2019 (Part I – Dr. Lacy Hunt)

FAIR USE NOTICE This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.  If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.

NOTICE  Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.