Monday, August 24, 2009

The Clueless Wall Street Journal

WSJ features a page 2 column today that has this doozy of a point in it:

For the administration, the answer is clear: Err on the side of continued expansionary policies...For fiscal conservatives, the answer is equally clear: Start cutting the federal deficit and slowing the growth in the money supply now...
Earth to WSJ, the money supply (m2 nsa) is not expanding.

The money supply peaked in March when it hit 8382.4 billion. Preliminary July data now shows money supply at 8326.7 billion. The stock market and economy are about to crash again because of this.

And don't tell me about Fed credit climbing, that peaked in May at 2169.162 billion. As of August 18, it stands at 2034.701 billion.

Bottom line, money growth stopped a long time ago, and Fed credit has stopped.

Forget about the comparisons with 1937, the comparison that needs to be made is with the period leading up to the October 1987, when money growth collapsed from 10% annualized growth in January, 2007 to under 5% in early October. Or with the period before the September 2008 meltdown, when annualized money supply growth dropped from 7.5% annualized to again under 5%. (with a virtual halt in the summer of 2008)

In the current period, January 2009 to the present, annualized money growth has dropped from over 10% to under 8%, but with virtually zero growth in M2 money supply since March.

An economic structure built on money printing can not support itself when the money printing has stopped. Despite WSJ reporting to the contrary, money growth has stopped


  1. Thanks!

    Corrected, the peak was actually in March at 8382.4, not February.

  2. What about M3 that is no longer reported. Where do you think all of this money they are creating in the multiple Trillions is (would otherwise be) reported?