Wikinvest Wire

Have you seen M3 lately?

Wednesday, July 08, 2009

Haven't looked at this chart from NowAndFutures in some time now - either someone's asleep at the switch over at the Federal Reserve or M3 really isn't all that important an indicator.
IMAGE Then again, maybe this is what the central bank didn't want people to see. What was it, about three years ago that the Fed discontinued reporting of the broadest measure of the money supply and conspiracy-minded folks thought it was going to go to the moon?

It looked like it was headed there ... that is, right up until last summer.

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Bruno T said...

Please clarify your point and what the items are in the graph.

And if I read it right (may not be) isn't it still growing at about a 6% pace?

Even a 6% increase in money supply with a decrease in output means higher prices doesn't it?

If money supply were rising 16% and there were 16% more goods/services it would seem more in balance. So isn't the nominal rate of change less important than the balance between money supply and goods to buy with it?

Tim said...

The items are M3 money supply on the left and year-over-year percent change in M3 money supply on the right.

I'm not sure what my point was other than that the year-over-year change is dropping to levels that we haven't seen in a while

Chuck Ponzi said...


Are you sure there's a decrease in output?

Secondly, if a tree falls in the forest, and there's noone around to cut it up and use it, even though wood supply has increased, do prices for wood fall?

Perhaps supply/demand is not enough to describe what's happening. Expectations go a long way to fuel prices up and down.

Just sayin'.

Anonymous said...

I'm speculating that the M3 would be solidly negative if the mark to fantasy models were not used.

I hear that overall debt in the US is at something like 75T so don't understand how that connects to the M3 number.

Any new info on M0, M2, M3 and trends would make some great blogging material.


The Prudent Investor said...

M3 annual growth rate 5% plus 5% recession still makes a horrific monetary inflation of 10%.

Anonymous said...

What this seems to be saying is M3 has leveled off at 14T. And the annual change rate is dropping and now at 6%. So, you could say the Obama administration is, in fact, not inflating the money supply?

Bruno T said...

Well Chuck, I just assumed production was down. They're shuttering plants, laying off workers, etc. Businesses are going bust in areas where there is too much demand (stupid shops in malls, for example) and many service businesses have gone from 20 employees to the owner and 1 helper, trying to survive. That seems like a drop in capacity. I guess it's all a matter of how fast it drops vs the money supply increase.

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