Thursday November 15, 2007

US M3 hits 18%

peakoil.com (thread, thread) -> nowandfutures.com :

For most of 2007, US M3 money supply growth was hovering around 12-14%. That was already quite high. But in the past month or so, M3 has gone vertical and is now hitting 18%, as seen in this chart :

- Since we don't have instantaneous 2007 Q4 GDP figures, let's use, for now, 2007 Q3 GDP growth which was 3.9% year-on-year. That is, if we take the government's word for it. Supposing that we do that, we divide 18% by 3.9% to get 4.6.

So, on a year-on-year basis, US M3 money supply growth is outrunning GDP growth by over 4 times. That is highly inflationary, going by the classic definition of inflation. You see this manifest itself in higher prices : all the way from the NYMEX exchange to the increasing gasoline pump price, all the way from the wheat futures markets to the increasing price of bread at the supermarkets.

Is 2007 Q4 GDP growth going to make up the difference and bring down the M3-GDP outpacing? It could, but that is not likely. Despite a confident outlook by Sony's president, the heads of various logistics companies are reporting incoming shipments into ports such as Long Beach, California have "fallen off the charts". The traditional build-up for the Christmas shopping season doesn't seem to be happening this year like it should.

The ongoing housing market bust isn't helping either, and neither are the problems in the sub-prime and derivatives markets. Not to forget that next year, 2008, is an election year for the Americans. Elections are highly inflationary.

(2007-11-15 13:28:31 SGT) [Biz] Permalink

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