Posted on 05/27/2010 7:13:46 AM PDT by blam
The Worst Money Supply Plunge Since The Depression Means A Double Dip Is Now A 'Virtual Certainty'
Vincent Fernando, CFA
May 27, 2010, 3:18 AM
The stock of U.S. money as measured by 'M3' money supply fell to $13.9 trillion from $14.2 trillion during the three months ending in April.
This 9.6% annualized contraction is unprecedented in the post-Depression era, and shows how, in this sense, America isn't printing more money. There are actually less dollars in the system since U.S. money supply is crashing, even well into the recent economic recovery.
The positive take on this is that we don't have to worry about either inflation or the Fed tightening significantly any time soon.
The negative take is that this crashing money supply will lead to both deflation and a double dip recession:
Telegraph:
"It’s frightening," said Professor Tim Congdon from International Monetary Research. "The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly," he said.
...
Mr Congdon said the Obama policy risks repeating the strategic errors of Japan, which pushed debt to dangerously high levels with one fiscal boost after another during its Lost Decade, instead of resorting to full-blown "Friedmanite" monetary stimulus.
"Fiscal policy does not work. The US has just tried the biggest fiscal experiment in history and it has failed. What matters is the quantity of money and in extremis that can be increased easily by quantitative easing. If the Fed doesn’t act, a double-dip recession is a virtual certainty," he said.
The danger, critics such as Mr. Congdon say, is that Bernanke as a Keynesian
[snip]
(Excerpt) Read more at businessinsider.com ...
So zer0’s going to pay me money to borrow from his stash?
Later.
When Obama is done with the economy, it will be more of a flat-liner than a double dip.
Only a CFA would ignore M1 and M2 when making this statement.
Unless they could make more money by generating panic.
jeez, does Pat Buchanan work for the Business Insider?
What’s a few trillion among friends?
The only way anybody can pretend there will be a “double” dip is to pretend that stock market averages are a proxy for the economy. No real graph of economic activity has recovered to anywhere near its pre-2008 levels.
Truth be told they would be better off printing $100 bills and dropping them from helicopters ";^)
Kynesianism for Kenyans!
Is a trillion a thousand billion?
“The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly,” he said.”
######
The US will never recover until it STOPS SPENDING, particularly on the lazy, idle able-bodied.
yes
yes
I was thinking along those lines. At least I was wondering why they were missing.
I had to use my credit card yesterday for an emergency purchase.
My hands were literally shaking when I did it.
I am spending this morning moving money around so i can put it off in one month.
You can’t cure alcoholism with more vodka, and you can’t cure a debt binge with more debt.
All debts must be paid down or defaulted. Debt is money, it spends just the same, and that is why the M is shrinking.
All of Bernanke’s printing so far is a gnat fart in the face of the ongoing credit crash. But it’s still driving up future USG interest costs.
I have an idea to increase liquidity to the financial system and end the recession: Repeal the 16th Amendment and constitutionally prohibit all taxes on savings, income and investment.
Then abolish the IRS and institute a national sales tax that is completely transparent, the levels of which can only be set by our elected representatives.
Prohibit total taxation or spending to go beyond a certain percentage of GDP/GNP unless there is a formally declared war. Automatic across-the-board spending cuts would kick in if spending exceeds those levels.
Oh, yes and close the borders, prohibiting all benefits to be paid to non-citizens including having their children in public schools. Illegal aliens who commit crimes should be summarily deported. Repeat offenders should be jailed.
The mere anticipation that something like this was about to pass would be enough to propel the stock markets and get business large and small to start hiring people again.
Tragically, the present administration is going in the complete opposite direction, thus we are in for more unnecessary suffering and privation.
For those that care, a high level rundown of the M1, 2 and 3 money supplies:
http://economics.about.com/cs/money/a/credit_cards.htm
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