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Seventeen days ago, silver was $90/oz from APMEX. That was list price of a 1oz round, shipped and everything. Spot price was ~$80.
Today, it's $120 shipped, $110 spot, over +30% in a little over two weeks.
Gold is at $5185 for a single round delivered to your door, up from 4650, or 11%. Using spot it's about 12%.
Is this hyperinflation? Is this de-dollarization? A bubble? Does this have anything to do with Venezuela? With Iran? Taiwan? AI?
I'm honestly grasping at straws here, because metals aren't supposed to do this. I've been worried about the specter of hyperinflation since 2008, but it never really materialized, and so my worries were able to be soothed by looking at the lack of hyperinflation in reality.
You can't even tell anything happened in 2008 when you look at the money supply, but you can't help but notice that we've nearly x5 the money supply since December 2019.
Then again, silver is a useful metal. It gets blown up in missiles, it gets used in microchips and electronics, solar and battery technology, and more. Business building these things will simply pay the price for the metal they need and then use it, driving the price up regardless of speculation, but I can't believe that the usefulness of silver has quadrupled in the time since it was going for $25/oz.
In May 2020 FRED changed it's definition of M1 to include savings accounts, which is why there's a huge spike in specifically that month. If you switch the graph from billions of dollars to % change this is much clearer. Changes in M1 (percentage wise) seem to have been pretty similar before and after (perhaps even less volatile after), based on my eyeballing the graph. They have a blog post explaining it.
M2 goes +500 +1000 +800 in the same timeframe.
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It is pitch black. You are likely to be eaten by a grue.
Seriously, whose idea was this? We should have just kept calling the old definition M1, and created the new definition as M1.5 or M1b or something. Instead we've got a definition of M1 that's so screwed up, explaining precisely how screwed up it is is a famous problem in philosophy.
My impression is that continuing to construct the previous series was not really practicable. The blog post talks about this a little bit. The change in the definition wasn't arbitrary. The fed changed a regulation that required "savings" accounts be permitted no more than 6 withdrawals a month, otherwise the account had to classified as a "transaction" account. Transaction accounts are included in M1 but savings accounts aren't. They also count differently for capitalization requirements. It sounds like when the fed changed the rules about limited withdrawals banks largely started reporting all their accounts as "transaction" accounts, and therefore contributing to M1. So the fed can't really construct the old M1 anymore because they relied on banks to make the relevant distinction between accounts and banks largely stopped making that distinction in reports to the fed once it no longer served a purpose.
There's actually a little blurb under the FRED chart noting this discontinuity in definition for the M1 and M2 measures.
Oh that's why banks did that! Thanks.
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Yeah, that makes sense, but defining a new measure that we can calculate and giving it the same name isn't actually a solution to our inability to keep calculating the old measure, it's just a very interesting case of the streetlight effect error. We should end our M1 graphs at the date where we can no longer calculate the original M1 definition, start our "M1b" graphs at the date where we have enough data to calculate the new M1b definition, and never plot them as the same line on the same graph. OP here isn't the first or even the tenth person I've seen who didn't realize that that graph discontinuity was an artifact of a definition change, despite (or, really, because of) the paragraphs underneath that are needed to explain that.
That's fair. I think it's a hard problem that I don't have a strong opinion on. In the case the fed chose, there's the obvious potential for confusion due to a very dramatic change in the graph. Notwithstanding any kind of clarifying text on the page. On the other hand, if you create a new series it can be hard to discover that the old series exists, when it might be useful. FRED actually already has at least one discontinued M1 series, which was weekly data.
My perception is that, from FRED's perspective, they are still reporting the "same" thing (the sum of some field on a report bank's file with them). If they changed their underlying methodology I suspect they would discontinue the old series and create a new one (as with the weekly data) but in this case it's the reporting entities whose behavior changed.
That's really interesting!
From a discoverability standpoint I'd think that the solution would be a simple hyperlink - the discontinued M1 page has a link to the new M1SL; just add a link in the other direction too and we're good.
But from a epistemological standpoint? The mathematician in me wants to say that it's silly to call the new data a new series, so long as it's the same thing being measured, even if it's evaluated with a different frequency. But the engineer in me is bowing in awe to whomever decided something like "we're using a different evaluation process at the lower frequency, therefore it's a different measurement even if it's the same measurand, therefore we're putting it in a different series".
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