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Economy in Brief

World Money on Very Different Path...World Economies Nonetheless Stuck on the Very Same Road
by Robert Brusca  August 26, 2011

Money supply is moving in all different directions across the main monetary center countries. These disparate movements reflect the various paths these key countries have taken in dealing with the financial distress. The UK has undergone the biggest boom-bust in money supply growth. The chart above tracks nominal money supply by country. The UK has gone from the greatest growth rates to the weakest in matter of two years. Its choice to run a program of fiscal austerity in the early stage of recovery has led to a continuing to battering of the economy. Political parties are at each other's throats as they are in the US. The UK's situation while different in its details has eerie similarities to the circumstances unfolding in the US. Nearly mirror image problems find the UK Labor party demanding a roll back of the sales tax hike which pretty much mimics the Republican demand to roll back and repeal Obama-care in the US. The US has very high unemployment and jobs growth appears to have been all but snuffed out. In the UK riots have set in reflecting the strains in that economy.

Neither the attempt to stimulate itself into recovery (US) or to use austerity (UK) has worked very well. US money supply growth continues to accelerate while the UK measure continues to shrink.

EMU money supply growth has ramped down and has more or less stabilized. In Japan money supply growth has been remarkably steady throughout. Still in Japan its deflation continues to dog the economy hampering its efforts rebuild after is devastating series of disasters. In EMU debt problems are the complication. It's as though the financial crisis never ended even though the German economy has had a fairly strong- if short-lived- economic recovery phase. Europe is still growing but its activity measures are decelerating rapidly. And the financial crisis remains in full-swing. The end game is uncertain.

There is no panacea for this crisis. Europe has been too slow to capitalize its banks after the crisis and as a result they are caught in a nasty trap as the Euro-Area itself has reeled under what may prove to be its fatal fall. The Zone could, ironically, be undone by its own fatal flaw as in a Greek tragedy because it did not lock up the fiscal side of its union as well as it did the monetary side. This means that this flaw and Greece itself have been its undoing and now national bond markets once thought to be almost of 'one risk' are discriminated against with very fine pencils.

Europe is still bickering over how to patch-up its crisis with effectively no talk about the fatal flaw that caused it. The UK is in the middle of a still weak economic path and its prospects are still chilling. The US is floundering and the regional surveys continue to show a weakening trend with more economists saying that the probability of recession growing.

The global economy remains a mess and a variety of methods have failed to solve the puzzle of its impasse.

Look at Global and Euro Liquidity Trends
SAAR-ALL EMU: Money & Credit G-10 Major Markets: Money Memo
  €-Supply M2 Pvt Crdt $US M2 £UK M4 ¥ Jpn M2+Cds OIL:WTI
3-Mo 3.1% 2.6% 16.6% -1.3% 3.2% -38.5%
6-Mo 2.3% 2.5% 11.0% -2.0% 4.0% 18.1%
12-Mo 2.1% 2.4% 8.2% -2.4% 2.9% 27.6%
2Yr 2.0% 2.0% 5.0% 3.9% 2.8% 22.8%
3Yr 3.1% 1.7% 6.1% 6.5% 2.8% -10.2%
Real Balances: deflated by Own CPI. Oil deflated by US CPI
3-Mo 3.2% 2.7% 14.5% -2.6% 2.8% -39.6%
6-Mo 0.3% 0.5% 6.8% -5.3% 4.0% 13.6%
12-Mo -0.4% -0.2% 4.4% -6.6% 2.6% 23.2%
2Yr -0.2% -0.1% 2.5% 0.1% 3.2% 19.9%
3Yr 1.9% 0.4% 5.1% 3.3% 3.8% -11.1%
UK M4 uses June for July
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