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 ...
bump for later
“The Fed’s Hockey Stick Chart”
http://www.thenewamerican.com/economy/commentary-mainmenu-43/768
Fed’s stats on M1 & M2:
http://www.federalreserve.gov/releases/h6/hist/h6hist1.txt
Looming Deflationary FOrces:
http://www.inflationdata.com/inflation/Deflation_Articles/Signs_of_Deflation.asp
Money Supply Charts:
http://www.shadowstats.com/alternate_data/money-supply-charts
See 2nd “Money Supply Chart” here: http://www.crystalbull.com/stock-market-timing/Money-Supply-chart
Well, Gold and oil are up...
So - helicopter Ben now has to become C 130 Ben? C-17 Ben? or even C-5 Ben?
How about B-52 Ben?
M3 dropped for one quarter. One. Quarter. Maybe a few folks just moved their money from CDs (part of M3) to corporate bond funds (not part of M3). Oh, my gosh, not that!
These chicken littles remind me of the fellow who warned against getting on a bus headed south. No! No! He screamed. That bus is headed south and if it keeps going that direction you will drown in the Gulf of Mexico.
The US has just tried the biggest fiscal experiment in history and it has failed————————
Wrong the U.S. said NO don’t do it, the calls were 900 to 1.
Pelosi, Obama and Reid just tried the biggest spending spree eva in history and they failed!!
Yes
I’m really sorry, but I’m missing what you are talking about in that post.
I’m not an economist, BUT.....
How can the Money Supply be plunging when our government
(not to mention governments all over the planet) are cranking the printing presses as fast as they can go, 24/7?
Yes, if you are an American.
The prefixes tell us how many thousands there are:
bi= 2 sets of thousands 1,000,000,000
tri= 3 sets of thousands 1,000,000,000,000
quad= 4 sets of thousands 1,000,000,000,000,000
quint= 5 sets of thousands 1,000,000,000,000,000,000
etc.
It you're a Brit, a billion is a million million, go figure...
It is in the US. In most of Europe a trillion is the same as our billion billion.
The unions are happy.
Mortgage rates are at or soon will be at 50 year lows. People are refinancing but not a lot are buying.
A drop in M3 is therefore likely to represent a correction to realistic levels, and not necessarily something to be feared.
Help me out here. The Actual drop was < 2.2%. Is it really accurate to create a trend off of a single datapoint?
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