Vertical takeoff - US M3 money supply growth rate jumps over 16%

The nowandfutures website provides ample ammunition for the inflation versus deflation debate. The latest update shows that the US M3 money supply growth has gone vertical, jumping up from around 13% to over 16% as the Fed pumped over $620 billion into the market last week, and reportedly that figure has gone over $1 trillion this week. This jump in the money supply figure is highly inflationary - unless the US has a 16% GDP growth rate to match, and most assuredly it does not. Official figures put it as 2% or so, hence the real inflation rate is close to 14% (M3 - GDP). The official GDP figures are highly suspect anyway, so the real inflation rate should really be higher - but that's a story for another day.

Sure, we are having a deflationary scare at the moment, with the Dow Jones falling below 10,000 and a financial system meltdown going on. Sure, there is gigantic asset price deflation going on as large hedge funds, investment funds, and probably your next-door neighbour panic and sell off everything indiscriminately across nearly all asset classes including stocks, bonds, commodities and property.

But - get this - there is no monetary deflation going on. As long as the money supply keeps going up, and there is no matching economic growth to maintain overall stable prices, there will be monetary inflation. If the current money growth rate keeps up or even accelerates, there will definitely be gigantic inflation down the line. The literally trillion-dollar question is inflation in which sectors, and the timing of it all - the when, where and how.

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