Friday, August 13, 2010

The Money Supply is Stirring

After money supply numbers were released yesterday by the Fed, with one number, 3-month seasonally adjusted M2 growing at an annualized rate of 5.3%, a number that had been pretty much flat for nearly a year, Bob Murphy emailed me with this comment:

Have you checked your favorite monetary indicator lately? It's heading north...
My response:

Oh yeah, I watch it every week. There is a lot of noise in the numbers, so I tend to wait it out awhile before saying anything. But there is upside movement for the first time in a long time.
I am also not aggressively sounding alarm bells because my guess is that for money growth to have a significant impact on the economy you would need annualized growth of close to, or over, 10%. Right now we are, with the latest numbers, at most in the 3% to 5% range. But it is getting interesting, especially since this is all occurring BEFORE the Fed announced its plans to reinvest incoming cash flow from MBS money. Chernobyl here we come?


  1. Also check out M1+savings (I consider time deposits and most MMFs investments, not money); growing 11% y/y and 16% for the annualized weekly growth...

    Link to the chart:

    M2-minus growing 6.5% y/y; MZM - 1.5%

  2. It'd be nice if we got that crash you've been calling for for so long, first, BEFORE we get another inflationary echo boom.

  3. For those of us with inclination to graphics -- M2nsa with noise removed (red):