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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (21644)	12/3/2000 11:26:21 AM
From: patron_anejo_por_favor	Read Replies (1) \| Respond to of 65232

JW...with all due respect, there was NO significant slowdown in money creation at the beginning of the year. The adjusted monetary base is an extremely narrow measurement, which doesn't include most of the financing activities responsible for accelerating money creation (including GSE-related mortgage lending). In other words, M1 and M2 don't mean a whole lot anymore. The broadest measurements (M3 or MZM) tell the tale much more clearly: stls.frb.org MZM is up approximately 7.5% Y-O-Y. This occurred at the same time the S&P has fallen about 7% (not to mention the Nasdaq Comp, which is down much more). The point is, there is a limit to how much further money supply will help goose economic growth, in large part determined by how overextended consumers and businesses are when you start to loosen. This is liquidity trapping in action, pure and simple. The business cycle has not been repealed, only postponed (by overly loose monetary policy in '98 due to LTCM/Asian contagion and as you pointed out, by Y2k concerns last year). It will have to work its magic (ie, flushing out impaired credit, reducing indebtedness of businesses and consumers) before further reliquification will have the desired effect. For further information, check out the following link (written in June...BEFORE most of these problems were evident). prudentbear.com