From here, see money stock as measured by MZM, and the gold price, and, while you’re at it, stocks.
Source link: http://blog.mises.org/7105/not-good/
Not good
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{ 13 comments }
good for me…
don’t forget to look at $US index.
how much longer can the Chinese & Japanese sit on all these dollars and watch them lose more and more value.
Wall Street cheerleaders begging for a rate cut like it will magically fix everything.
btw,
the scariest chart on there IMO is Defense Spending… since 2000 its slope is sharply up & constant.
“…see money stock as measured by MZM…”
What a stupid presentation! Isn’t it obvious that a variable with nearly an order of magnitude range on a graph needs to have a logarithmic vertical scale instead of linear in order to keep the rate of change sensitivity constant over the entire graph?
Regards, Don
no
Those wall street clowns are no better than the socialists that want state healthcare or welfare. The whole mentality of wall street is completely flawed. They have it pretty good though, they encourage the government to screw up the economy by inflating the dollar just so they can make instant money and then they convince the idiotic public that the government isn’t doing enough to help the economy when the public’s retirement accounts lose money due to bad wall street investments.
What I can’t understand is why the euro isn’t doing as badly as the dollar. It seems artificially high considering that the european government is shaky and it seems to be an extremely artificial curreny.
The money supply chart is a realistic depiction of what Wall Street counts on the Fed to deliver: monetary inflation that is constant, permanent, and–although most institutional money managers are loathe to state this in polite company–pernicious. Unfortunately, the particular chart you selected misses the drama of the gradual tightening of the last few years–since 2004–that generated unhappiness in the real estate housing market in 2007. It also misses the recent run of money pumping by the Fed that is hammering the dollar, boosting gold (for the present, at least), and lifting the spirits of dazed stock market perma bulls and bloodied hedge fund geniuses. A useful pictorial of this drama is Frank Shostak’s AMS, which is somewhat closely replicated by M1. Or simply use the monetary base published by the St. Louis Fed.
The stage is apparently being set for a rampup of inflation, starting in a couple of years. Most Austrians believe that rising inflation is guaranteed by the existence of our central bank, controlled–as it has to be–by sober and scholarly monetary cranks who believe fervently in the powers of financial alchemy to yield “economic growth”.
But, before we can look ahead with certainty to rising inflation, we’ve got a nasty recession to get through. I worry about the possibility of an unpreventable decline in Frank Shostak’s “pool of real funding”, which occurs in response to profligate consumption, massive destruction of captital through malinvestment and taxation, and saving reduced still further by abnormally low interest rates such as prevails in Japan. If the pool of real funding falls into a downward spiral, time preferences are forced still higher. This depresses demand and pricing for producer goods, which comprise the greatest portion of the economy. (Consumer good production constitutes a much smaller proportion of the economy, in spite of the widespread misconception that it adds up to “70% of GDP”.)
If the pool of real funding in the USA falls in reponse to years of statist economic abuse, the numbers of credit worthy borrowers, and demand for new loans from those borrowers, falls a lot. This is what happened in Japan, in coincidence with its big real estate bust. The Bank of Japan ardently sought to create inflation by pumping in new reserves at a very high rate for several years running–a proceedure that held rates below 1%–but this failed to ignite the hoped-for artificial boom. Already, Japan is falling again back into recession.
I wonder if a similar fate awaits the United States.
I wonder once catastrophe has struck, will there still be any faith left in fiat money?
Of course there will be. Seeing as how most adults don’t even know what fiat money is. If the economy falls into disaster the president and congress will be blamed for not intervening enough in the market. The people that suffer the most are so brainwashed (starting in middle school) that they don’t know why things fail and are taught not to ask why. If people would just start asking “Why?” the world would be a much better place.
Perhaps it may be a good opportunity for the Austrians to step in and educate the disgruntled masses.
Education is boring. I want my MTV.
Great charts. Thanks.
I am curious. When will modern Austrians stop worshiping Friedman and his quantity theory of money and return to Mises and his value theory?
Mish has an interesting piece on a variant of money supply he calls M’.
Sooperdave,
All this breast beating by the monetarists Friedman, Shostak, and Mish in trying to define money is futile and totally unnecessary. Today, with our floating currency, money is being created and extinguished almost from moment to moment. But even if you could define money and determine its quantity you would still not have the monetary solution.
As Mises clearly stated the value of money is dependent on both the supply and demand for money, not just the supply. Mises very skillfully taught us the value theory of money in his “The Theory of Money and Credit” but it seems that concerning monetary policy too many modern Austrians are more comfortable with Friedman monetarism than with Mises value theory of money.
The change in the price of gold will give you the value of money. Even though gold itself is not money today, it is impossible to have a currency with no value, a pure fiat currency and so gold still serves the function of valuing the currency. For the currency to function as money it must have value.
Today’s floating currency value is reflected in the market price of gold. Now the spot price of gold contains non-monetary elements but even at that it reveals the effect of non-monetary events on the value of the currency.
Until we return to Mises and value theory our monetary theories will be floating more than our currencies.
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