Tuesday, Aug 19, 2008
M3 southbound, flowing freely
Telegraph: Sharp money supply contraction points to Wall Street crunch ahead
The US money supply has experienced the sharpest contraction in modern history, heightening the risk of a Wall Street crunch and a severe economic slowdown in coming months.
Data compiled by Lombard Street Research shows that the M3 ''broad money" aggregates fell by almost $50bn in July, the biggest one-month fall since modern records began in 1959. Monetarists say it is the sharpness of the drop that is most disturbing, rather than the absolute level. Shifts in M3 are a lead indicator of asset prices moves, typically six months or so ahead. The latest collapse points to a grim autumn for Wall Street and for the American property market. As a rule of thumb, the data gives a one-year advance signal on economic growth, and a two-year signal on future inflation.
23 Comments
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1. sold 2 rent 1 said...
Here is the Telegraph US M3 graph
2. sold 2 rent 1 said...
Here are the graphs of US M3 from nowandfutures.com
3. sold 2 rent 1 said...
"US Household debt is now 131pc of disposable income, compared with 93pc at the top the dotcom bubble, 79pc in the property boom of the late-1980s, and 62pc at the end of the 1970s."
In 1976 Martin Armstrong said in
http://www.contrahour.com/contrahour/2006/06/martin_armstron.html
"In 1976, one of these 8.6-year turning points was quickly approaching (1977.05). For the first time, I began to use this model expecting a significant turn in the economy back toward inflation. My friends thought I was mad. Everyone was talking about how another Great Depression was coming. The stock market had crashed by 50% and OPEC seemed to be undermining everything. I rolled the dice and stuck to it and to my amazement, inflation exploded right on cue as gold rallied from $103 to $875 by January 1980."
We only have one more Armstrong turning point (April 2009) before the mega-low in 2011.
We should know by late summer 2009 if we are to have a deflationary depression or hyperinflation.
4. drewster said...
s2r1,
Thanks for the additional graphs, interesting that they don't seem to match up with the Telegraph / LSR graph.
The Federal Reserve ceased publishing official M3 statistics in March 2006. As your graphs show, any figures after that date are actually "M3b", based on in-house research. Lombard Street Research must have a different methodology for calculating the figures. I have no way of knowing whose method is more accurate. In general LSR have a pretty good track record, they timed the UK housing crash correctly when so many others (in particular Capital Economics) called it far too early. Whether that same expertise is applicable to the US money supply I don't know, but I'm inclined to agree with them.
5. beartil2010 said...
'the US Federal Reserve took the controversial decision to stop reporting the statistics in 2005 on the grounds that the modern financial system had rendered the data obsolete'
Need any more evidence these guys are corrupt? Sheesh.
So money supply looks to be collapsing. This is not indicated in the nowandfutures.com graphs - that is annualised data, so it will be slow it turning around just like our annualised housing numbers? You can see it starting to head down.
Looks like bad news all round for the US today.
6. shipbuilder said...
Surely this puts paid to any speculation about hyperinflation?
7. sold 2 rent 1 said...
And below is US M3 from shadowstats.com
LSR are 3 month annualised figures
Shadowsats and nowandfutures are year to year.
So maybe LSR is more volatile but they may be better as a leading indicator when things finally do collapse.
8. shipbuilder said...
I remember pointing out a few times on here that no matter what level the bailouts were at, they were nowhere near the level of mortgage lending during the boom (banks profits show this if nothing else), so surely the increase in money supply must be small or negative. I struggled with it, but couldn’t see the logic of inflation becoming a problem and therefore the logic of gold rocketing, which seems to be held as a given by many on here.
Do people still see inflation as an issue? This thread points out the danger of graphs and interpretation of data, if nothing else.
9. James said...
Shipbuilder - indeed so... rather proves s2r1 doesn't have a clue what he's talking about re money supply. Can't you just see him spluttering:
"B-B-B-But!! Fiat Currency! Fractional Reserve! Must be exponential! Will go vertical! Must expand inexorably to its own demise! Hyperinflation! The 1930s! The NWO! Bilderberg!"
10. icarus said...
Not sure what this is all about. M3 was still growing until July and then there was a record one-month fall. Remember (1) it's only one month, (2) that fall isn't measured in constant (real) dollars, (3) it comes at the end of a period of very high growth and (4) there was a sharp fall last year followed by a sharp rise. If it's a lead indicator, six months ahead of what it's indicating, why was it rising some time after property prices were falling?
11. icarus said...
Oh - and nice headline drewster, you really should be the Sun headline writer.
12. icarus said...
(Reference to constant dollars above is in response to the claim that the fall is a record since 1959).
13. p. doff said...
9. James said...''s2r1 doesn't have a clue what he's talking''
Inclined to agree there James - we've seen proof of that since 5th June (or was it July).
Trouble is, many followers of this site have fallen for the mumbo-jumbo and some have even made financial decisions on the strength of it.
My own view is that anybody who acts on advice (be it gold ramping or anything else) anonymously given on a website known to be frequented by conspiraloons, from somebody who openly believes in water powered cars, free energy suppression and earthquake machines, deserves all they get.
14. mountain goat said...
Why be nasty if you don't agree with someone?
15. sold 2 rent 1 said...
MG,
In case you hadn't noticed, James is a "common purpose" or similar type agent.
He very rarely contributes anything useful to this site, and takes the opportunity to attack me at every moment.
His bosses have told him that in the forthcoming revolution/turmoil/economic collapse he will be a winner.
What he doesn't realise is that there are metaphysical evolutionary forces at work that no-one can control, and when the power structures of these secret societies collapse he will be left high and dry.
16. James said...
Mountain Goat - it's not being nasty. I ask s2r1 questions. I hold him to his predictions. I try and explain what fractional reserve banking actually is. For this, I'm apparently a common purpose agent. Forgive me if I get utterly exasperated by his total refusal to answer questions, be held to a prediction or open his mind to the idea that the world of mainstream economics may just possibly know a bit more than a few fools on youtube...
I am actually worried about him. When the conflagration and change of consciousness does *not* happen in 2011/2012 (because let's not forget it just won't) what will he do then?
Perfect example of how this works from yesterday...
http://www.housepricecrash.co.uk/newsblog/2008/08/blog-uk-house-prices-could-easily-decline-pc-from-the-peak-16302.php?comment=added
17. jack c said...
Guy's (IMO) James (currently @ 9) never posts anything constructive or adds any useful information to the HPC debate - man (or woman) on a mission to simply slate S2R1 at every opportunity
18. James said...
Challenging someone who has set themselves up as an unquestionable authority - whilst actually knowing b*****-all about the subjects IS a constructive thing to do, jack c. If he could only answer the very simple questions I ask, I wouldn't be able to keep on doing it, would I?
So, from the link above - what's the y axis, s2r1?
19. mountain goat said...
I enjoy peoples views even if they are off the wall, but they should be open to challenge and criticism. I have no right to tell people what to say but just wanted it known that it's the name calling, ridiculing, insults etc that makes for painful reading. I didn't mean to single anyone out in particular because in the entries above both sides do this. Attack views and opinions but not the man/woman.
20. nopensionnohouse said...
James, just ask him about how his gold is doing!!!
Snigger.
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