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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Thomas M. who wrote (82901)	8/12/2000 12:51:47 PM
From: Tommaso	Respond to of 132070

Well, of course it grows steadily. Milton Friedman, perhaps the most thoroughgoing monetarist ever, and certainly anything other than an advocate for inflation, argued for many years that a steady growth of about 4% of M2 was ideal for noninflationary economic growth. The point is that the rate of M2 growth is way down. Compare those latest figures to these: bog.frb.fed.us A shift from 7.2% to 1.8% rate for M2 in just three months is a drastic change of direction. 1.8% is way below productivity gains and below the current inflation rate unless you eliminate energy and food costs. I never have understood why these should be eliminated, except to make everyone feel better about the statistics. Whether low M2 growth rates will persist is another question, but just to go on saying "The Fed is expanding credit" ignores what is currently going on. This is one of the economic determinants that, as Keynes said, not one person in a thousand pays any attention to until the effects begin to appear. I am not predicting what the Fed will do, but I would venture to predict that if these monetary trends continue, we will get a recession in the economy, and if we get a recession, there will be a very large decline in the stock markets. Furthermore, given the huge build-up of debt, the Fed may have a hard time turning the economy around once a serious contraction begins, even with all the flexibility that a complete fiat money allows. And then there was this dream I had, which involved fourteen fat cattle and fourteen lean cattle . . .