I started this blog in June 2007 asking these questions: Are we in a massive asset bubble that will blow up in our faces ??? - ANSWERED YES ! Is western and particularly British society on the verge of social collapse??? What are the best common sense long term investment strategies to keep you rich? When will consumption/debt bubble economics end and a real savings/production economy begin ???

Monday, 26 January 2009

Money supply will soar once banks loosen purse strings

Not that the central bank has been exactly resting on its oars.
On the contrary, according to the Federal Reserve Bank of St. Louis, the monetary base (the raw material for the money supply) has risen at a seasonally adjusted annual rate of 86% over the past year. Bad enough, but over the past three months this has skyrocketed to an annual rate of almost 1,000%!
Adjusted reserves have ballooned from $100 billion to $700 billion since mid-September, while the Fed's balance sheet has more than doubled over this period of time, from about $900 billion to a thumping $2.2 trillion.
These funds are beginning to show up in the Fed's two measures of the money supply. M2 has risen 8% over the past year, while MZM, the St. Louis Fed's measure of liquid money, is up more than 10% during the same period.
This is with the banks still reluctant to lend. Once they loosen their purse strings, the money supply will soar.
When this happens, don't be surprised if the Fed stops reporting these numbers. This is what it did several years ago, when it stopped reporting M3, which apparently was rising too fast for the Fed's comfort.


Check out the rest of this blog here.
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