Ten Years of Money Growth in 8 Weeks

Federal Reserve Bank of St. Louis ^ | November 5, 2008 | Federal Reserve Bank of St. Louis

[Santiago de la Vega]

Please click on the link. This is astonishing.

[DeLaine]

lack of understanding ping

[BeAllYouCanBe]

OK I clicked on the graph - what next?

[TLI]

uhh, that’s gonna leave a bruise...

[Lloyd227]

Not surprising really, but still interesting to see it in graph form.

Thanks for posting

[Crazieman]

So.. plans to protect one’s self from hyperinflation. Go!

[M-cubed]

I think it's safe to say.....at some point PM’s and commodities will be the next big bubble...

[arthurus]

ping

[arthurus]

So.. plans to protect one’s self from hyperinflation. Gold!

[nicola_tesla]

Slow down and take a deep breath - or three.

Money creation is up - but money velocity is down. More money is being destroyed - how much money was lost in the stock markets last week ? - than is being created.

Deleveraging and deflation have a long way to run yet.

[gotribe]

So the question is: recession/depression or hyperinflation? Figuring out where to put you money has never been harder, at least in my lifetime.

What’s interesting is that the Fed moves and Treasury bailout moves have saturated the market with cash to the point that banks are putting theirs back in the Fed. Out the front door, in the back door. Another interesting data point, in a Barron’s column this week Alan Abelson showed how the yield spreads and credit swaps on government securities (yes, there are credit swaps on AAA securities) point out that the market is saying the government has maxed out its credit limit - much more and it will lose its AAA rating.

[Leisler]

FB St. Louis puts out some good stuff.

By the way, Syron who just left Freddi Mac with something around 25+ mil, was the Fed chief at Boston (1990) and did the original red lining report, that started the Community Redevelopment strong arm of the lending institutions.

He's kind of a alpha/omega of the whole thing. From the big pity fest for dysfunctional, non working, crime ridden denizens being discriminated by mythical white shoe Yankee banks in Boston, all the way to the melt down and private profit at the instrument of destruction.

http://www.boston.com/business/articles/2008/08/06/syrons_side_of_the_story/

[Brilliant]

It’s a good thing. Too bad Bernanke waited until now to let loose. It takes about a year for a stimulus like that to work itself fully thru the economy.

[Brilliant]

I don’t think we’re going to have a hyperinflation any time soon. More likely deflation. In the long run, of several years, this might be problematic, but only if the Fed continues on this path too long. I rather doubt they will though. Their aim is to give the economy a boost. Once it’s clear that it’s responding, they will stop.

[gotribe]

I hope you’re right. That’s how I’m invested right now.

[Oatka]

Money creation is up - but money velocity is down. More money is being destroyed . . . Deleveraging and deflation have a long way to run yet.

BINGO. I did OK during the inflationary Carter years, but this time we have a credit implosion of Biblical proportions. I will consider myself lucky if I can maintain even my current frugal living standard while this collapse ripples through the country. Nobody wins in that scenario. Other than being in cash and stocking up on food/ammo, I'm at a loss.

[Norseman]

If anyone is seriously interested in Fed policy and it's effects, you might be interested in the site I created to explain what I've learned over the past 35 years of so of Fed-watching. It's not an active blog; more of an archive, though the posts are recent. I've made very little effort to publicize it so it gets hardly any traffic but, as I said, if you're serious about Fed policy I think you'll get a lot from reading it.

OnTrack Economics

[narses]

Nice site. What is your opinion of where we are and what it will take to get us back to a more normal monetary policy world?

[Norseman]

>>What is your opinion of where we are and what it will take to get us back to a more normal monetary policy world?<<

I think that with this latest change to a policy of paying interest on excess reserves that there’s a strong possibility that we’re not ever going to get back to “a normal monetary policy world.” The Fed, in making that move, has lost control of monetary policy, in my opinion, but we’ll see I guess.

As for where we are, the Fed’s massive reserve injection in September resulted (under the old regime where interest was NOT paid on excess reserves) in a massive increase in demand deposits. If that increase persists, we should see a recovery get underway about the first quarter of next year with indicators such as retail sales, durable goods orders, etc., reflecting that recovery around March or April of 09. Ultimately, inflation will pick up again, but right now I think we’ve been working through a deflation, rather than the inflation everyone has been so concerned about. Hence, gold has been plunging along with most other commodity prices and the economies of the world are almost all in decline. This is all consistent with deflation, not inflation.

Under inflation, everyone has a job; they’re just working too cheap so they keep getting hired. Under deflation, everyone refuses to take the necessary pay cuts to move wages into line with prices and so companies are forced to lay off employees if they are to cut costs. The economy is acting much more like it’s in a deflationary period than in an inflationary one, but with the Fed’s recent moves that is probably about to reverse.

[narses]

Thanks. Oddly that makes sense to me.