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Economy in Brief

Money Supply Growth Stabilizes
by Robert Brusca October 27, 2008

Europe’s money supply growth and credit growth do not show signs of further slowing in September. Growth is slower that it has been over the past 12months but 3-month growth rates are about the same or a bit higher than 6-month rates of growth. In the US and the UK rates of growth in three months have picked up beyond those for their respective 12-month paces. In Japan money growth rates are very low and continue to ease. The grow rates for real money balances actually look a bit stronger all around except in Japan.

As the financial problems have gotten worse one thing we have seen is that money supply numbers have bulged. Money demand has three components: precautionary, speculative and transactions demand. We tend to look at increases in money supply as being for transactions demand but in times such as these the precautionary element could be spiking as investors ditch riskier investments and flock to bank deposits. I would not look at the pick up in money growth or in the growth in real money balances as something that is inflationary for that reason.

Look at Global and Euro Liquidity Trends
Saar-all Euro Measures (E13): Money & Credit G-10 Major Markets: Money Memo
  €-Supply M2 Credit:Resid Loans $US M2 ££UK M4 ¥¥Jpn M2+Cds OIL:WTI
3-MO 10.1% 8.5% 7.2% 7.0% 16.3% 1.2% -63.7%
6-MO 9.2% 8.1% 7.0% 4.0% 14.3% 1.8% -3.5%
12-MO 10.1% 10.5% 8.7% 6.2% 11.8% 2.2% 30.8%
2Yr 10.2% 10.8% 9.7% 6.2% 12.3% 2.0% 27.2%
3Yr 9.6% 11.2% 10.2% 5.7% 13.0% 1.5% 16.4%
Real Balances: deflated by Own CPI. Oil deflated by US CPI
3-MO 9.2% 7.5% 6.3% 4.3% 9.7% 0.0% -64.6%
6-MO 6.6% 5.5% 4.4% -1.2% 7.2% -0.7% -8.3%
12-MO 6.2% 6.6% 4.9% 1.2% 6.3% 0.0% 24.6%
2Yr 7.1% 7.7% 6.6% 2.3% 8.6% 1.0% 22.4%
3Yr 6.9% 8.5% 7.5% 2.4% 9.6% 0.6% 12.7%
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