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30 Years of U.S. Money Supply and Interest Rates

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money supply and interest rates

money supply and interest rates

30 Years of U.S. Money Supply and Interest Rates

Money supply and interest rates are important macroeconomic factors that can change the direction of entire economies.

In the United States, the Federal Reserve, also known as the Fed, uses open market operations to influence these factors and fulfill its “dual mandate” of maximum employment and stable prices.

But how is money supply associated with interest rates?

How Money Supply Affects Interest Rates

Interest rates determine the cost of borrowing money in an economy. The higher the interest rate, the more expensive it is to borrow money, and vice versa.

By the law of supply, when there is less money in the economy, the cost of borrowing money tends to be higher. All else being equal, a decrease in money supply corresponds to higher interest rates, and by contrast, an increase in money supply tends to put downward pressure on interest rates.

Central banks use monetary policy—the macroeconomic policy that manages interest rates and money supply—to improve economic health. However, the nature of the monetary policy differs based on the state of the economy:

  • Expansionary Monetary Policy
    Expansionary monetary policies aim to stimulate economic growth by increasing the money supply, lowering interest rates, and increasing demand, spending, and investment in the economy.
  • Contractionary Monetary Policy
    Contractionary policies aim to slow down unsustainable economic growth and inflation by decreasing the money supply, increasing interest rates, and reducing spending while facilitating saving.

Today, the U.S. Fed is employing expansionary monetary policy, with near-zero interest rates and some of the fastest growth rates for M3 money supply ever seen.

But how has the Fed’s monetary policy changed over recent decades?

Economic Booms and Busts in the U.S.

Between 1990 and 2020, the U.S. money supply (M3) increased from around $3 trillion to $19 trillion, a rate that far exceeds that of economic growth.

During this time, the U.S. economy went through major shocks that affected its monetary policy.

The 2001 Recession

Internet and tech-based companies came to dominate the U.S. economy by the end of the 1990s.

During the same period, the Fed eased its monetary policy, with the goal of reducing interest rates and increasing liquidity in the economy. Excess money supply also went into the stock market, propelling the NASDAQ index to new highs at the time.

To curtail rising inflationary pressures and an overheating stock market, the Fed raised its Fed funds rate target six times between June 1999 and May 2000, reducing money supply growth. This, in turn, slowed down the flow of capital into the stock market in the lead-up to the dot-com crash and the recession that followed.

The 2008 Financial Crisis

The 2008 recession was the most severe economic downturn in the U.S. since World War II.

In an effort to spur the economy out of recession, the Fed dropped its rate target from 3.5% in January of 2008 to near-zero rates by the end of the year. Additionally, it also started a series of large-scale asset purchase programs (also known as quantitative easing), accelerating money supply in the economy.

From the end of 2008 to 2015, the Federal Open Market Committee (FOMC) established near-zero targets for the Fed funds rate in order to support economic activity and job creation.

The 2020 Recession

The pandemic-induced recession of 2020 called for policymakers and central banks around the world to take action.

In response to the financial turmoil, the FOMC dropped its Fed funds rate target by 1.5 percentage points to a range of 0% to 0.25%. It expects these near-zero interest rates to stay until 2023. Furthermore, at the end of 2020, M3 money supply was up by almost 25% year-over-year, the largest yearly increase since 1961.

The Fed’s response to economic turmoil involves large changes in money supply and the Fed funds rate, which affects not only the short term but also the long-term direction of the economy.

The Future of U.S. Money and Interest Rates

An economy’s money supply has a strong association with the currency’s purchasing power and inflation, although there are other factors at play. As the number of dollars in the economy increases, the amount of goods and services that can be bought with one dollar falls as price levels rise.

Due to the policy response during the pandemic, inflation has become a growing concern for investors and consumers alike. With money supply at unprecedented highs and interest rates near all-time lows, it’ll be interesting to see how long it takes for the U.S. economy to recover and rates to rise again.

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Visualizing the Genealogy of Exploration Success

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Mineral Exploration Success

Visualizing the Genealogy of Exploration Success

In the last decade, 63% of all mineral discoveries in the Western world were made by junior explorers. These small companies are the vision of a dedicated few.

It is the people that make a great company, and it is great explorers that make great discoveries. This infographic sponsored by SKRR Exploration shows the incredible experience and knowledge of two leaders in mineral exploration brought together in one new venture.

Two Paths to Exploration Success

According to the common adage, overnight success stories take a long time. Ron Neolitzky and Ross McElroy have traveled two different paths but along their route, they have uncovered vast amounts of mineral wealth in Canada.

Ronald Netolitzky Ross McElroy
  • 1964-67: Graduated from the University of Alberta with a B.Sc and M.Sc. in Geology.
  • 1985: Became President of Delaware Resources and acquired the Snip property.
  • 1986: Struck a gold discovery at the Snip property, which produced 1Moz of gold over its lifetime.
  • 1988: Invested in Consolidated Stikine Resources and drill-tested Eskay Creek, which would go on to produce 3.3Moz of gold and 160Moz of silver over its lifetime.
  • 1990: Sold Eskay Creek stake to International Corona for $67/share as part of an acquisition.
  • 1990: Received the Bill Dennis Prospector of the Year Award.
  • 1993: Purchased 100% of the Brewery Creek property as president of Loki Gold.
  • 1996: Transformed Brewery Creek into a heap-leach operation.
  • 1996: Merged Loki Gold with Baja Gold and Viceroy Gold to create an entity with an annual production of 200Koz of gold.
  • 1996: Received AME’s E.A. Scholz Award for discovery and development achievements.
  • 2003: Acquired the Galore Creek property for Spectrum Gold, later merged with NovaGold Resources and partially sold to Teck Resources for $275M.
  • 2007: Oversaw Yamana Gold’s $577 million acquisition of Viceroy Resources as chairman.
  • 2010: Oversaw Osisko Mining’s $372 million acquisition of Brett Resources as chairman.
  • 2015: Inducted into the Canadian Mining Hall of Fame.
  • 1987: Graduated from the University of Alberta with B.Sc. in Geology.
  • 1987: Joined uranium giant Cameco and worked on the McArthur River discovery in Saksatchewan’s Athabasca Basin, which is now the world’s largest uranium mine.
  • 1989: Worked with French nuclear Company Cogema (now Orano) on the Shea Creek uranium discovery in Saskatchewan, Canada.
  • 1990-99: Managed the Hope Bay Gold Project with BHP Minerals, discovering three high-grade gold deposits.
  • 2007: Joined Fission Energy as VP of Exploration before rising to the rank of COO.
  • 2009: Led the technical team that discovered the high-grade J Zone uranium deposit at Waterbury Lake and sold to Denison Mines.
  • 2012: Used airborne radiometrics and radon in-lake survey technology to discover the Triple R uranium deposit on the Patterson Lake Property, with an indicated resource of 102M lbs of U3O8.
  • 2013: Received the Mining Person of the Year Award from the Northern Miner.
  • 2014: Received the Bill Dennis Award for a Canadian discovery.

This combined experience is coming to bear in one company to uncover Canada’s next mineral frontier.

Bringing Experience Together: SKRR Exploration

SKRR brings together the experience of two great explorers to uncover the next mineral frontier, Saskatchewan. This junior explorer is working on the next great discovery with 6 projects in the Trans-Hudson geological corridor

  • Father Lake Nickel Project: Copper, Nickel
  • Ithingo Project: Gold
  • Irving Project: Gold
  • Cathro Project: Gold
  • Leland Project: Gold
  • Olson Project: Gold
  • Manson Bay: Gold

With a proven location and legacy of exploration success, SKRR is ready to unlock the next mineral frontier in Saskatchewan and continue the tradition of a dedicated few uncovering the next great discovery.

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The World’s Top 10 Gold Mining Companies

Together, the world’s top 10 gold mining companies account for roughly 22% of the share of the total gold market.

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Top 10 Gold Mining Companies

The World’s Top 10 Gold Mining Companies

Unlike paper currency or many other types of assets, gold has maintained its value throughout the ages.

First used by cultures in modern-day Eastern Europe in 4,000 BC to make decorative objects, the metal today represents a global business with operations on every continent, except Antarctica.

The industry is dominated by a select group of majors.

Together, the world’s top 10 gold miners produced 27.48 million ounces (Moz) in 2020, worth approximately $48 billion, according to data from Mining Intelligence.

North America Leading

At a country level, China is the largest producer in the world accounting for around 11% of total global production.

However, no Chinese company appears among the top miners.

RankCompanyHeadquartersCountry2020 Production (Moz)
1Newmont DenverUSA 🇺🇸5.88
2Barrick GoldTorontoCanada 🇨🇦4.84
3PolyusMoscowRussia 🇷🇺2.87
4AngloGold AshantiJohannesburgSouth Africa 🇿🇦2.81
5Kinross GoldTorontoCanada 🇨🇦2.38
6Gold FieldsJohannesburgSouth Africa 🇿🇦2.13
7Newcrest MiningMelbourneAustralia 🇦🇺2.06
8Agnico EagleTorontoCanada 🇨🇦1.73
9Polymetal InternationalSt. PetersburgRussia 🇷🇺1.40
10Harmony GoldJohannesburgSouth Africa 🇿🇦1.38

At the top of the gold mining companies list, Colorado-based Newmont has ownership of mines in Nevada, Colorado, Ontario, Quebec, Mexico, the Dominican Republic, Australia, Ghana, Argentina, Peru, and Suriname.

As the only American company on the list, Newmont produces 21% of the yellow metal poured by the top companies.

Canada, which is known for its mining industry, has three companies on the list; Barrick Gold, Kinross Gold, and Agnico Eagle, producing 32% combined.

Russia, which is expected to become the world’s top producer by 2029, has two companies ranked. Together, Polyus and Polymetal represent 15% of the top miners’ production.

The top 10 players account for ~22% of the total market share, which is anticipated to grow due to increased merger and acquisition activities.

Wealth and Luxury

Over six and a half thousand years after its discovery, more than 90% of the gold mined annually is destined for jewelry, bullion, and coins.

  • Jewelry: 36.83%,
  • Investment: 46.64%,
  • Central banks: 8.58%,
  • Technology: 7.95%

The metal is also used in dentistry, as it is the best material for fillings and crowns since it is easy to insert, and is non-reactive with the human body.

Golden Future

Global production fell by 1% in 2020, the first decline in a decade, according to the World Gold Council.

Some analysts argue the world has reached “peak gold” – which means that the maximum rate of extraction has passed and the production of the metal will continue to fall until, eventually, mining for it shall cease entirely.

Demand, however, shows no sign of slowing down as the golden metal remains firmly synonymous with security, stability, and longevity.

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