H McKee Stewart Jr

Musings on Business, Finance, and Economcs.

Grim Tidings on M3

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So what? What’s M3, and why should I care? For the uninitiated, M3 is a measure of money supply. M1 is essentially cash and near cash and checking accounts. M2 consists of M1 plus small, short term savings deposits. M3 is M2 plus large savings instruments, Eurodollars, etc.

So, what are the grim tidings? The Telegraph’s Ambrose Evans-Prichard reports that M3 fell at an annualized rate of 9.6% in the three months to April. That’s comparable to the monetary contraction of the Great Depression. Well, thank goodness that the Fed doesn’t bother to publish M3 data anymore. If they don’t publish it, it can’t be a problem, right? Right?

Except for the fact that monetary contraction, in conjunction with prohibitive tariffs on imports put the “Great” in the Great Depression.

From John Williams’ “Shadow Government Statistics”, here’s the skinny:

Chart of U.S. Money Supply Growth

If M3 contraction continues at this rate, it will be very, very bad news. As in “move your investment portfolio into canned beans, spam, and bullets”. And gold and silver coins in your physical possession.

Too soon to panic, but not too soon to start losing sleep.


Written by hmstewartjr

27 May 2010 at 10:38 PM

Posted in Uncategorized

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