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Economy in Brief

Selected National Money Supplies
by Robert Brusca September 25, 2008

UK money supply is decelerating at the most rapid pace among our sample countries but its growth rate for real balances is still strong: 6.1% over 12 months and 11% (saar) over 3 months. Over the past year real EMU growth money is just about as strong as in the UK. The US shows substantial money supply deceleration and posts negative growth rates in real balances for horizons inside one year. The same is true of Japan.

In Europe credit to residents and overall loan growth are still strong and have hardly slowed. The slowing in real balances is more a function of rising inflation than of slowing credit.

While the credit crunch in the US has been more severe Europeans have created money at a much more rapid pace despite their insistence on a cap for overall money growth. Both the UK and the ECB have made a laughing stock of that ceiling rate.

Take my cap for money supply growth—Please! It’s like an old worn vaudeville joke.

In some quarters there are still concerns about accounting losses at European banks. US institutions are being hit harder and the impact is showing up in the money markets where trading has been seized up at various points. Growth is slowing everywhere and in Europe the news about slowing has been coming fast and furious. For the US the long standing bad news is getting a bit worse. Despite appearances European growth will slow a lot more and the ECB will be in dilemma over what to do with inflation and money growth still so high. It is interesting to note that the US central bank cut rates more aggressively yet has kept money supply growth in check much better than has Europe.

Look at Global and Euro Liquidity Trends
Saar-all Euro Measures (EA15): Money & Credit G-10 Major Markets: Money Memo
  €-Supply M2 Credit:Resid Loans $US M2 ££UK M4 ¥¥Jpn M2+Cds OIL:WTI
3-MO 7.4% 9.0% 6.0% 1.5% 17.8% 2.9% -23.5%
6-MO 8.3% 9.1% 7.4% 3.5% 12.5% 1.8% 52.4%
12-MO 9.8% 11.1% 8.9% 5.4% 11.2% 2.4% 61.3%
2Yr 10.3% 11.2% 9.9% 5.9% 12.4% 2.1% 26.5%
3Yr 9.6% 11.4% 10.3% 5.5% 12.8% 1.6% 21.7%
Real Balances: deflated by Own CPI. Oil deflated by US CPI
3-MO 5.1% 6.6% 3.7% -5.3% 11.0% -1.5% -28.6%
6-MO 4.9% 5.7% 4.1% -2.4% 6.7% -1.4% 43.7%
12-MO 5.8% 7.0% 4.8% 0.0% 6.1% 0.2% 53.1%
2Yr 7.3% 8.2% 6.9% 2.2% 8.9% 1.1% 22.1%
3Yr 6.8% 8.6% 7.5% 1.7% 9.5% 0.6% 17.3%
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