Friday, July 10, 2009

Headed for a Double Dip?

It appears more and more likely that we are headed for another major dip in the economy.

Ben Bernanke continues to tighten money supply growth. From double digit annualized money growth, peaking at 15%, M2 nsa is now down to an annualized rate of 2.6% over the last three months.

Excess reserves, though still very high, are also continuing to trend lower.

However, the Fed Funds effective daily rate which was hitting the ceiling of the Fed target rate has backed off to mid-target, in the 0.15 range. So whatever was causing that anomaly appears to have moved on. If it had continued at the ceiling, I would be yelling, "PANIC," by now.

But, the tight money growth is enough to take the economy down, again. Way down.

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