Talking about The Macro Trader » Contrary To Popular Belief Money Supply Is Still Fairly Tight

 

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The Macro Trader » Contrary To Popular Belief Money Supply Is Still Fairly Tight 

Ever since the David Tepper interview last week on CNBC we have heard a lot about how money supply is finally expanding.  Yes, M2 has been rising the last several weeks, but before the hyper inflation crowd gets out of control we thought it would be a good idea to look at the actual numbers.Looking at a plain chart of M2 you can see that yes it has broken to new highs but it really only declined for about six weeks back in March and April of 2010.  During this time and since then we have seen bond yields drop lower and lower indicating that inflation is essentially non-existent.  So this rising M2 is really nothing new.To get a better picture of the money supply we can look at M3 data.  In the chart below we have M3 with the 12-month ROC overlaid.  As you can see not only has M3 been headed slowly but continually lower but the 12-month ROC has not exactly rocketed higher.  Yes, it has improved but marginally at best.

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