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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 652.53

-1.5%

Nov 20 4:00 PM EST

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To: Zeev Hed who wrote (52500)	5/29/2000 11:43:00 AM
From: UnBelievable	Read Replies (2) of 99985

Money Supply Measurements and Equity You must assume that currency in circulation has to grow at the same rate as the world economy Absolutely - The reluctance to give up the gold standard is not due to the efficiency of Gold as a basis for currency, but rather on reluctance to trust anyone with the ability to "create" money. Equities are in fact a form of currency. As long as Equity gains and losses are kept within the "country" of the Equity markets there is not really a problem with having an Equity dollar not equal a US dollar. The inflationary effect for the US Economy of the currently inflated values of the Equity markets, (in terms of the hard assets for which they are a surrogate), occurs when Equity dollars begin to be exchanged for US dollars. A variety of factors have converged to vastly increase the amount of this type of foreign exchange coming into the US Economy. In a very real sense the Investment Banks are printing money. The inflation risk associated with maintaining the exchange rate at the previously established level (and continuing to increase as the market rises)is far greater than the "wealth effect'. When you say that the total currency in circulation in the world is $5 Trillion, what measures of money supply are you including? Do you, or anyone have a estimate of the total value of the Equity markets in the US. What percentage of M2 are US equities (I recognize they are not included in M2)? Is there a data source to look at this historically?

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