Tommaso, the 0.6% Sept to Oct. M1 growth annualizes to 7.44%,
confirming that the Fed was goosing things over
the last month. But the longer-term numbers present an interesting picture-- M1 growth 1.6% since last Oct., hardly represents
a printing (well, treasury-buying; they've got plenty of it printed,
I'm sure) binge. This is currency (including currency held
outside the US), checking accounts, and such (details are in
your link). The interesting thing is the much faster M2 growth,
8.5% over the same period... this includes savings accounts and,
crucially I would guess, retail money market accounts.
The divergence in M1 vs. M2 growth rates suggest to me changes in
in the operation of the financial system, possibly related to Fed
policy and certainly AG is watching them and thinking about them
(or should be!), but not necessarily a *direct* result of
"printing money" (i.e. Fed open market operations, rate tweaking
and such)). Basically, we are looking at some kind of expansion
of the M2 multiplier (ratio of M2 to base money).
I don't know the nature of retail money market funds
very well, but I believe many are offered by stock brokers, and
run by the brokerages themselves. I don't know what their
reserve requirements are, etc... but it seems like probably, when
assets flow into brokerage money market funds, as they have
probably done during this market boom, this probably changes the
M2 multiplier.... I imagine these places have interesting ways
of raising cash to meet reserve requirements for their money funds.
I think we need Paul Krugman here to explain what's going on,
and set Mike straight on Austrian voodoo -SEG-.
Seriously, I'd like to hear more comments from those well informed
about the workings of the financial/banking system. MB?
Seems like you're saying a credit crunch is the only way to
shock the credit market, probably inducing a recession,
to keep the larger monetary aggregates in line?
Any academic economists lurking?
Cheers,
HB |
