Snip from todays DR on M3.
dailyreckoning.com
- And so it is against this backdrop of deflationary
sentiment that we analyze the latest money supply figures.
As Bill reported yesterday, the bean counters report M3
increasing at a 20% annual rate. In the last 4 weeks, M3
has gone up by $155 billion! Predictably, with numbers as
mind-boggling as these, we weren't the only sleuths to
notice.
- Conspiracy theorists came up with all sorts of
explanations for this. "There must be a crisis of historic
proportions coming," cries an alarmed essayist at
Safehaven.com, "and the Federal Reserve Bank of the United
States is making sure that there is enough liquidity in
place to protect our nation's fragile financial system. The
amazing thing is, the Fed's actions mean they know what is
about to happen. They are aware of a terrible, horrific
imminent event. What could it be?"
- "I reject the notion that the Fed is acting
irresponsibly," continues our worrywart, "No, something is
up, bigger than we have ever seen in the history of the
United States... the amount of liquidity is too large. The
Fed is deflating the value of the monetary base by a fifth!
Why are they willing to do this? Wisdom says something bad
is up - big time."
- Please retake your seat, dear reader, there is no need to
panic. If there is something a-brew, you won't find it in
these figures. The reason is simple. The M3 expansion is
only a continuation of the current multi-decade trend in
consumer indebtedness.
- "The components of the total money supply over which the
Fed has direct control - M1 money supply is a reasonable
proxy for what the Fed is doing in the money-printing
department - did not experience unusually-large gains over
the past 4 weeks," explains Steve Saville, editor of the
excellent newsletter 'The Speculative Investor.'
- "When we look at the money-supply components," points out
Mr. Saville, "we see that $86B of the aforementioned $101B
growth in M2 resulted from increases in household savings
deposit and money market deposit accounts. In other words,
the recent surge in money supply growth was caused by the
same thing - consumer borrowing - that caused the surge in
money supply growth last year, and the year before that,
and the year before that... the latest jump in the money
supply simply tells us that nothing has changed... yet." |
