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Have you seen M3 lately?
Friday, May 01, 2009
Not having looked at the M3 statistics in quite a while, the broadest measure of the nation's money supply that was discontinued by the government but which has been reconstructed over at NowAndFutures, it's not surprising to see that the growth rate is down sharply.
What is surprising is that, for all the talk of deflation these days, M3 has increased by about a trillion dollars since last fall when we entered the current phase of the financial crisis.
6 comments:
Yes but the M1 Money Multiplier fell off the cliff, and it can't seem to write itself. All the free money given to banks is sitting at the NY FED drawing interest which means velocity is 0.
If you sell your stocks and put the cash into a MM fund, M3 increases.
If you sell your stocks and put the cash into a MM fund, M3 increases.Not necessarily... this assumes that the cash you received from the buyer wasn't already counted in M3.
Anyhoo, looking at the chart, there was a huge ramp in M3 up til about May 08, at which time it started to flatline for the rest of 08, more or less. So the yoy comparisons are just now going to start becoming "easier", fwiw.
Rich
Velocity is irrelevant. The longer velocity stays at zero, the worse the inflation will be when people begin to use it more. And it will happen. We have central banks who think and indeed target price stability - they will pump that mother up, regardless of how much money they print in M3. Eventually that will feed through. These things always take time, but once inflation gets started it will rocket. We are a while from that stage though.
I was looking at that graph last week. The graph that creeps me out is this one:
http://research.stlouisfed.org/fred2/series/WSECOUT
The amount of securities the Fed owns went up, as did the stock market. The two graphs do not measure the same thing, but the coincidence is creepy.
Phil, ya and deficits don't matter either, right? You are at a point where a dollar's worth of debt adds a dime to GDP. I guess this terrible number doesn't matter?
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