Source link: http://blog.mises.org/7135/still-amazed-at-this-chart/
Still amazed at this chart
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It’s part of what he been clumsily called ‘de-disintermediation’.
That is, as non-bank markets for credit have frozen up and as CP issuance has plunged, banks have been taking more and more of the stuff back onto their balance sheets (whence much of it had been deliberately shifted in order to avoid regulatory constraints and costs).
It just goes to show that we should not be too dogmatic abot what we measure as ‘money’ or ‘credit’ in the present era. Economic truths may be eternal but the institutional channels through which they work are in a constant state of flux.
Incidentally, central banks will be happy with this development as it brings more lending back under their aegis. Commercial bank shareholders may be less ecstatic now that their litle game has been rumbled!
corrigan,
Exactly, and a good illustration why we must return to gold and move away from the tendency toward monetarism.
As if to quote the monetary interventionists: “The sky is the limit!”
This graph confronts the monetarist. How do you define money supply? MZM?
How do you define money supply?
As supply of financial scams ?
Ironic, the graph looks oddly similar to those used by Gore and the enviro-socialists — same trajectory, yet no one seems concerned.
Dear Jim,
Thank you for that insight. If you can send me the link that shows the graph used by the enviro-socialists. Post the link as a comment here or send it to me personally if you wish.
If there has been enough economic activity to require that much money (a reflection of the activity), then there should be no trouble. But, as the value of increasing housing prices doesn’t seem to reflect such activity it presaged a collapse. Isn’t it possible and maybe even likely that this is an indication we’re in a larger bubble economy than just ‘housing’?
Why did the housing market crash? Some people couldn’t keep up the cash flow.
Why would this larger economy bubble crash? Where in this economy is the weak point where cash flow isn’t flowing? What event would seriously block cash flow?
It would seem an upcoming ARM housing crash would have much more severe spill-over effects that what we’ve seen already.
Also, if the American government and markets are sucking in all available monies from around the world, including credit, then how much of a bump would there have to be to burst this world economy bubble?
It seems we’re in risky economic times.
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