Opinions or things of interest to a veteran futures trader.
Thursday, May 27, 2010
Telegraph:: US money supply plunges at 1930s pace as Obama eyes fresh stimulus
This is a good article by Ambrose Evans-Pritchard but this could have been written a year ago because the money supply behavior has been obvious for that long.
The distinction between money and debt can be drawn at any point, Keynes said. M3 (the subject of your link) draws the line closer to pure-debt and farther from pure-money than M2 or M1. M1 is circulating; if that declines it translates to declines in output. But if M3 declines (and M1 doesn't) then maybe that's just because some debt is getting paid off.
Does that make any sense at all, do you think? M1 is still going up....
Yes that does make sense. Paying down debt acts to contract money growth under a fractional reserve system like we have these days. As a matter of fact we have people paying down debt and/or trying to increase savings at the strongest levels in years. That is one of the major reasons we are not getting inflation even when fiscal stimulus is so strong. The psychology of the private citizen, especially the baby- boomer has really changed as a result of this recession. Boomers who have had it pretty easy and were building their 401k's and home equity for years without any real fear have been hurt badly by both markets setting back so far when they have so little working life left to recover. That psychological change is another force of contraction in the economy.
2 comments:
The distinction between money and debt can be drawn at any point, Keynes said. M3 (the subject of your link) draws the line closer to pure-debt and farther from pure-money than M2 or M1. M1 is circulating; if that declines it translates to declines in output. But if M3 declines (and M1 doesn't) then maybe that's just because some debt is getting paid off.
Does that make any sense at all, do you think? M1 is still going up....
Yes that does make sense. Paying down debt acts to contract money growth under a fractional reserve system like we have these days. As a matter of fact we have people paying down debt and/or trying to increase savings at the strongest levels in years. That is one of the major reasons we are not getting inflation even when fiscal stimulus is so strong.
The psychology of the private citizen, especially the baby- boomer has really changed as a result of this recession. Boomers who have had it pretty easy and were building their 401k's and home equity for years without any real fear have been hurt badly by both markets setting back so far when they have so little working life left to recover. That psychological change is another force of contraction in the economy.
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