Thursday, August 21, 2008
The bottom line is that one has to look not only at what M3 is doing, but why it is doing it. Nearly everyone got this wrong.
The Telegraph is reporting Sharp US 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. On a three-month basis, the M3 growth rate has fallen from almost 19pc earlier this year to just 2.1pc (annualised) for the period from May to July. This is below the rate of inflation, implying a shrinkage in real terms. The growth in bank loans has turned negative to a halt since March. "It's obviously worrying. People either can't borrow, or don't want to borrow even if they can," said Mr Stein.