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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: patron_anejo_por_favor who wrote (31938)	5/6/2005 12:13:10 PM
From: orkrious	Read Replies (1) \| Respond to of 110194

Money Supply Picture Paints Picture - Not Pretty by Charles Mackay, Friday May 06 2005 wallstreetexaminer.com The money supply measure that has the closest link to economic activity, M2, declined again in the latest week. This brings the raw number just about back to where it was about 11 weeks ago. A 'smoothed' number for the last 13 weeks shows M2 growing at a 2.8% annual rate. The presumed Fed target growth rate for money supply is about 5.5% to 6%. While GM and Ford rightly will get attention from the Fed - which manifested as a $1.25 Treasury purchase (monetization) Thursday - in the next few months the lagging money supply will get much more attention. The ability of the money supply to follow behind with nearly the same growth as the Fed's monetary base is usually like a dog following behind its leash. It is presumed by Fed policy makers that their tools will always work, but this dog no longer follows. US domestic money supply measures have stagnated in April because of higher marginal tax rates, and in the longer term, under the mounting pressure of rising interest rates and debt repayment on consumer debt which is rising twice as fast as income. Add in increasing energy inflation and you have a recipe for a recession. This is not an economy that can deal successfully with rising rates. Imagine the fix GM and Ford will be in as the interest rates they pay move higher. Rising interest rates are about to crash into an over leveraged and over burdened economy. While new mortgage debt is still providing some refuge for a few, the sky is darkening for most. Even in March's personal income report, real after tax disposable income was unchanged. In April it will be down. This isn't going to be pretty. If the Fed eases the dollar crashes, if it doesn't the economy falls.