Carl et al, on the subject of the Fed, did anyone notice the M2 report this afternoon? Reported after the close, it shows a continuing surge.
In the Barron's column "Current Yield" (page MW7 this week), renewed attention to the money supply, and the problems with it as a policy guide, is discussed at great length. One factor possibly contributing to the surge, according to Barron's, is capital flight from Asia into US$ assets (among other factors). Suggested reading. Also, the following is from Briefing.com:
Analysis
M2 continues to gallop. Against its Q4 base it is growing at an exceptionally quick 7.9% clip (fourth column in table below) and on a year-over-year basis it is growing at 6.6%, its fastest pace of the cycle (not shown in table). Take note: There will be no deflation as long as M2 sports growth rates like this.
In his February Humphrey-Hawkins testimony Greenspan mentioned that Fed governors and Reserve Bank presidents pretty much expect M2 to grow in the upper half of its target range (1%-5%) this year. It has now been exceeding the upper range of its target since August. While G and others are probably not overly concerned about this, they are paying more attention to M2. Note the following comment from H-H testimony.
"In recent years, there have been tentative signs that the historical relationship linking the velocity of M2--measured as the ratio of nominal GDP to the money stock--to the cost of holding M2 assets was
reasserting itself."
Data
Month |M2 Level |Growth mo/mo |Growth vs Base |Fed Target
Mar $4123.4B 8.3% 7.9%
Feb 4096.1 9.7 7.9
Jan 98 4064.6 7.5 7.1
Dec 4040.2 7.0 5.7 1%-5%
Nov 4017.5 7.6 5.6
Oct 3993.2 6.0 5.4
Sep 3973.8 6.5 5.3
Aug 3953.1 9.9 5.2
Jul 3922.0 4.3 4.6
Jun 3908.2 4.9 4.6
May 3892.7 0.8 4.6
Apr 3890.0 6.7 5.3
It's amazing that everyone was so focused on the ECI (the whole week seemed almost orchestrated to produce a rally on the ECI news - am I being paranoid again?) that they totally ignored the GDP report, so I guess no one noticed M2 either.
Bob |
