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

To: orkrious who wrote (32841)	5/20/2005 8:59:28 AM
From: orkrious	Read Replies (2) \| Respond to of 110194

Get Real by Charles Mackay, Thursday May 19 2005 Real money supply and real wage income are falling. If this continues, we may be heading for a real recession. wallstreetexaminer.com One of the leading indicators inside Thursday's report from the Conference Board is 'real' money supply. Real money supply is the 'M2' money supply figure reported by the Federal Reserve, adjusted for inflation. The level of M2 is closely correlated with economic activity. Changes in the growth of M2, particularly when adjusted for inflation, are a fairly reliable way of determining where the economy is, and where it is going. Real money supply not only fell in April, but fell at a more than 5% annualized rate. The news on real wages is not much better. Wednesday's report from the Bureau of Labor Statistics indicates that real wages for payroll employees fell 0.3% from the year ago period. The BLS includes in its assessment an optimistic view of the number of hours worked, which is only partially shared by the Conference Board. Even taking BLS figures at face value, after-tax real wages are dropping even faster. The Treasury's personal income tax receipts for April were unexpectedly $38 billion higher than the comparable month a year earlier. Real income drops have forced consumers to dip into savings, helping to accentuate the drop in M2 money supply. M2 money supply (unadjusted for inflation ) has now dropped the last three weeks in a row. The mathematically 'smoothed' number for the last 13 weeks shows M2 slowing its growth to a 2.1% annual rate, from a rate of more than double that three months ago. M2 has only grown 4.5% over the last year, which won’t be enough to sustain the kind of current-dollar GDP growth rate of 6.4% we saw in the first quarter. We are not in recession yet, but it may be time to get real about where the economy is going.