Citigroup's Surprise Index Heading South

For the last few weeks, money supply (M2) growth has been slowing substantially. Economic numbers are getting weaker as is the stock market.

Last Friday, Citigroup’s Economic Surprise Index was at -64. It’s in crash dive mode. Analysts are coming in with much too optimistic numbers. Last time it was this low was about a year ago. It’s slightly below 2010’s lowest reading (It's the red line in the chart below).

Since most economic analysts simply forecast, as the trend, what they have seen over recent months, they miss the inflection points. In 2011, they missed the upward economic activity that resulted from the aggressive money printing at that time.  Now that Bernanke has slowed money growth, they are missing the new downturn developing. If Bernanke does not start accelerating money supply growth very soon, we are headed for a major economic and stock market crash. You heard it here first. The Surprise Index shows that most economists are too bullish and don't have any idea of the dangers ahead.