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?

3 comments:

  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: http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=line&graph_id=&category_id=&recession_bars=On&width=630&height=378&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&ts=8&preserve_ratio=true&fo=ve&id=M1_SAVINGS&transformation=lin_lin&scale=Left&range=5yrs&cosd=2005-08-02&coed=2010-08-02&line_color=%230000FF&link_values=&mark_type=NONE&mw=4&line_style=Solid&lw=1&vintage_date=2010-08-13_2010-08-13&revision_date=2010-08-13_2010-08-13&mma=0&nd=_&ost=&oet=&fml=a%2Bb

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

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  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.

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  3. For those of us with inclination to graphics -- M2nsa with noise removed (red): http://s50.radikal.ru/i127/1008/43/5fd3954addaa.jpg

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