Wednesday, April 14, 2010

Annual M2 Growth Below 2% for the Last 4 Weeks

Money supply (M2) data through March are presented in the graph above, showing annual growth rates. Comparing M2 growth during the 2008-2009 period to the 2001-2002 shows comparable patterns, with a much greater deceleration in money growth over the last quarter or so than what happened in the 2003-2004 period. There were some periods during 2006-2008 when inflation was in the 4-5% range, but those periods were short and inflation was not sustained. Given the growth in M2 over the last few years, that would probably be the worst case scenario over the next 2-3 years, and the recent deceleration in M2 growth might prevent that from happening.

4 Comments:

At 4/14/2010 7:56 PM, Blogger OA said...

@ Anon 5:35, you're linking the CPI, not M2. And if you key in on recent years, not the history since 1910, it's decidedly not exponential recently. In fact, it looks like the current level is just getting back to the 10 year trend line. The R squared for a linear regression line (per Excel) is .9752. So hardly exponential. A 20 year is even a better fit line.

Using the Excel regression, the value in 2020 would be about 270. Same for a 5 year regression. That's also what it eyeballs at since it is so close to a straight line.

I don't happen to think inflation is going to stay under control, but I don't see how 100 years of history tells us anything.

 
At 4/14/2010 8:39 PM, Anonymous Anonymous said...

Everyone is de-leveraging so it looks like the money supply is low...But inflation is up thanks to minimum wage increase while unemployment is also up...The Fed is trying to re-inflate the economy but the spending and borrowing binge is over...The drunken sailor has passed out.... But things could change...it just takes a few banks and speculators to rev things up again..Where will the next bubble be??

 
At 4/15/2010 3:10 AM, Anonymous Anonymous said...

OA, the blogger deleted the posts of that "anonymous". He is sensoring posts here constantly.

Hey, it can easily go exponential. All exponential curves look linear at the start.

 
At 4/15/2010 10:25 AM, Anonymous Anonymous said...

How is the fed going to get out of the mess they have put themselves in

 

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