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That's one of the issues that's got Bernanke flipping out.  It's worrying him that M2 -- M2 is the important one as it relates to GDP, employment, etc -- isn't responding to Fed policy.  He's lowered rates a ton, but we're still seeing the money supply in trouble.

Another sign pointing to a steep recession, and perhaps a depression.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sat Oct 4th, 2008 at 09:13:25 AM EST
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From Last year

Is M3 money warning of an inflationary blow-off in the US? :: Ambrose Evans-Pritchard

Japan lived through this in the 1980s when it allowed property and stocks to mushroom out of control, mistakenly thinking the effects would be benign because retail price inflation was low. (The US did much the same in the 1920s but the collective mind in Washington and New York seems to forgotten that).

Capital Economics makes a different argument. Mr Ashworth said his group at first supported the Fed's decision, agreeing that (narrower)  M2 was good enough on its own.

"Recent evidence has made us reconsider that position. It appears that broad money and consumer prices have begun to move in tandem once again. Over the past two years M3 growth may even have been leading core inflation by a few months," he said.

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Sat Oct 4th, 2008 at 09:56:38 AM EST
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