US economy gathering steam. Part II

MattK · 02-27-2004

How many people have heard about the recent drop in the money supply (M3 and M2) despite the Fed's attempts to keep extending easy credit? Kind of like what happened in the 1930's...

Here is a relevant article:

Where has all the money gone?: Trends suggest possible U.S. liquidity trap

quote:

"The Federal Reserve may believe that it's keeping monetary policy accommodative, but if you look at the drop in the nation's money supply lately, the central bank may not be as easy as it thinks."

...

"M3, which adds large time deposits, eurodollars and other items, and even MZM, which includes all kinds of accounts on which checks can be written, also are shrinking, having abruptly changed direction in the past two months.

If this decline in the money supply were to continue, it could restrain economic activity -- not to mention pull the stock market down. Indeed, the recent slowing in consumer spending and the pullback in stock prices may very well be the first signs that the economy is becoming parched for liquidity."

02-27-2004	#12
MattK Members Join Date: Oct 2002 Posts: 97	How many people have heard about the recent drop in the money supply (M3 and M2) despite the Fed's attempts to keep extending easy credit? Kind of like what happened in the 1930's... Here is a relevant article: Where has all the money gone?: Trends suggest possible U.S. liquidity trap quote: "The Federal Reserve may believe that it's keeping monetary policy accommodative, but if you look at the drop in the nation's money supply lately, the central bank may not be as easy as it thinks." ... "M3, which adds large time deposits, eurodollars and other items, and even MZM, which includes all kinds of accounts on which checks can be written, also are shrinking, having abruptly changed direction in the past two months. If this decline in the money supply were to continue, it could restrain economic activity -- not to mention pull the stock market down. Indeed, the recent slowing in consumer spending and the pullback in stock prices may very well be the first signs that the economy is becoming parched for liquidity."