Money Supply Explosion Madness

M2 nsa three month annualized money supply growth has ticked up another notch, this past week, and is now growing at an incredible 19.3%. This is extremely high money growth, that is somehow being usurped by M1 growth. M1 nsa three month annualized money supply growth is at an astounding 73.2%, which means Fed Chairman Ben Bernanke is doing all he can to ease fears and get the economy going, by a policy of reckless abandoned. That most continue to put their money in the M1 components of currency and checking accounts is an example of the lack of understandng by the man on the street.

At some point this attitude of placing money in M1 will reverse itself and the economy will climb (at least as far as tracked data is concerned)and prices will soar. This is not the time to be in short-term Treasury paper.

As George Reisman has put it (Via an annonymous commenter at Free Advice):

The government today has unlimited powers of money creation. And so it is highly likely, given its evident willingness to use those powers, and the overwhelming public support that exists for using them, that the increase in the supply of money it brings about will ultimately outweigh the present increase in the public’s demand for money for holding. When and to the extent that that happens, and business sales revenues and profits begin to rise and employment and wage rates begin to rise, the public’s demand for money for holding will once again begin to fall.

At that point the massive increase in the quantity of money the government is currently bringing about will fuel sharply rising prices and give birth to a new crisis.