Sunday, February 8, 2009

Fear Subsides: M1 Money Growth Turns Negative

The M1 nsa money supply measure as of February 5,2009 is now lower than it was three months earlier on November 3, 2008. On November 3, 2008, M1 nsa stood at $1561.3 billion. As of February 5, 2009, it is below that number at $1555.9. This is an annualized decline of 1.4%.

Long term EPJ readers should not be surprised by this drop in M1 nsa. I have long pointed out that M1 nsa growth would drop once fear started to subside in the markets and individuals started to pull their money out of low-interest to no-interest checking accounts and move them into a bit more aggressive type accounts. This appears to be now occurring. It is an important signal that this phase of the downturn is very near its end.

M2 nsa, which we expected to continue to grow, even though M1 nsa would not, is, indeed, doing so. Three month annualized M2 nsa is growing at the remarkable rate of 19.3%. This M2 nsa growth is going to be highly inflationary, but what it is going to do first is rocket the stock market, and ultimately GDP and reverse the downtrend in employment.

Remember, you read it here first.

1 comment:

  1. I do remember that I heard it here first, as well as a number of other things I have read on your blog. I think your blog is one of the best economic blogs I visit--I like your short, snappy, well-focused posts with insight. I am looking forward to reading more.