View Full Version : M3 still growing?
I just checked bart's latest charts, and it appears that M3 is continuing to shoot higher.
With all the credit contraction, I'm just wondering how the hell that is possible, and with tightening lending standards, will see a contraction in money supply?
[QUOTE=DemonD;13294]I just checked bart's latest charts, and it appears that M3 is continuing to shoot higher.
dupe
I just checked bart's latest charts, and it appears that M3 is continuing to shoot higher.
With all the credit contraction, I'm just wondering how the hell that is possible, and with tightening lending standards, will see a contraction in money supply?
The growth in actual dollars has actually been quite flat since about March 2007 and we have fallen back into the 11-12% annual rate of growth range in the last 6-7 weeks from a 13-14% growth rate. Rate of growth is the thin blue line and should be read on the right hand scale.
http://www.nowandfutures.com/images/m3b.png
Also note that M3 has no credit in its definition, and even my M3 plus credit chart does not include derivatives like MBSs or CDOs. Even if it did, derivatives reporting is as far as 3 months behind.
M3 plus credit is running at about a 10% annual growth rate and credit alone has been down trending slightly since mid 2005 or so and is currently growing at around 8%.
CPI + lies is running around 9-10% annual growth rate too.
Ahh, now I understand.
Any predictions on whether the numbers will show further contraction with the end of 2/28 and the end of no-doc loans? (According to mish's sources and other places I've read these loans went completely away last friday)
I'm guessing there will be a lag in the numbers but the percentages will continue to trend downward for the next few months.
Finster
08-07-07, 01:53 PM
[money growth has] ... fallen back into the 11-12% annual rate of growth range ...
Those words alone ought to be worth a three-alarm fire ...
Ahh, now I understand.
Any predictions on whether the numbers will show further contraction with the end of 2/28 and the end of no-doc loans? (According to mish's sources and other places I've read these loans went completely away last friday)
I'm guessing there will be a lag in the numbers but the percentages will continue to trend downward for the next few months.
Your guess is pretty close to what I'm looking at, and the chances of an LTCM like black swan aren't exactly small either.
Check the long term M3 picture below, and pay special attention to the period 2001-2003. M3 took off and then came back down a lot.
That's not only compatible and confirming of the "ka" side of ka-poom but also aligns with my feelings were in a recession now and EJ's forecast of one later this year. It also tracks somewhat with how Mish views things... although I believe his views about loan desire completely drying up and us going into heavy deflation to be without much foundation.
http://www.nowandfutures.com/images/m3b_long_term.png
Here's one of my personal favorite charts on credit (and not just because it drives Finster to distraction due to so many lines ;)).
http://www.nowandfutures.com/images/credit_types_roc_short_term.png
For purposes of your questions, only look at the broad red total credit line and you can easily see the decline since mid/late 2005... and you can also see what occurred in 2001, which is roughly the path I expect things to follow... assuming the Fed, etc. doesn't pull off some outrageous "magic" etc.
The broad red line does not include derivatives. They're represented by the thin orange line and you can also see how they trail, that their annual growth rate had to be divided by 2 to fit on the scale and that they also dropped in 2001, starting soon after the first Fed funds rate cut and after total credit started to drop.
And as usual, history only rhymes - it does not repeat exactly.
The major issue right now to me is how well the Fed and others do with managing expectations and "managing" the stock market and the dollar.
That will have more to do with how soon and how fast and how deep we go down than any other factor... and given that well over 1/2 the people in the country already feel we're in a slowdown or recession right now (per the Gallup poll and others), it's not looking great.
The ducks appear to still be close to flying in a row to many, but the Bear Stearns hedge fund mess, the longer term effects from housing issues, an impending credit crunch and the recent stock market corrections are the first few shots... the next few consumer confidence releases, especially the U. Mich. one, will be unusually important. The Fed is not all powerful...
Those words alone ought to be worth a three-alarm fire ...
I have an Air Raid siren (http://www.nowandfutures.com/grins/air_raid_siren.mp3) that might work? ;)
As you saw above, we're still on track with that stag$%^tion term of which you're so fond... :eek: :D.
Money and credit growth of roughly 10%, negative real GDP when corrected by GDP deflator lies, CPI + lies running 9-10%, most central banks pushing on the go pedal... and consumers and the "real" public beginning to see the handwriting on the wall don't augur well.
I don't recall you being a big fan of consumer confidence data, especially from the Conference Board (and I agree - their methodology leaves something to be desired at the very least which is why I prefer the U. Mich. data), but drops in consumer confidence do precede many significant stock market drops and economic crunches ... and household net worth growth has been down trending for a while now, and gas & food prices are up (and "real" people don't give a damn about the core rate when that happens), and wages aren't up after even a CPI adjustment... and the Fed does not have a sterling history of controlling the business or stock cycle over time, even with all their behind the scenes games.
Finster
08-07-07, 04:11 PM
I have an Air Raid siren (http://www.nowandfutures.com/grins/air_raid_siren.mp3) that might work? ;)
As you saw above, we're still on track with that stag$%^tion term of which you're so fond... :eek: :D.
Money and credit growth of roughly 10%, negative real GDP when corrected by GDP deflator lies, CPI + lies running 9-10%, most central banks pushing on the go pedal... and consumers and the "real" public beginning to see the handwriting on the wall don't augur well.
I don't recall you being a big fan of consumer confidence data, especially from the Conference Board (and I agree - their methodology leaves something to be desired at the very least which is why I prefer the U. Mich. data), but drops in consumer confidence do precede many significant stock market drops and economic crunches ... and household net worth growth has been down trending for a while now, and gas & food prices are up (and "real" people don't give a damn about the core rate when that happens), and wages aren't up after even a CPI adjustment... and the Fed does not have a sterling history of controlling the business or stock cycle over time, even with all their behind the scenes games.
:D When it comes to fuzzy things like sentiment and confidence, my motto is the ol' tritism "watch not what they say, but what they do". Plus any survey stuff is going to be older than the latest market close, and whatever implications it has is already going to be baked into the market. One reason GDP data aren't very useful either; it's always about last quarter, the one before, or even the one before that. Then it winds up being batted around by inflation-induced noise anyway.
That said, if it has any reliable tendency to lead the stock market, that's a real hat trick. Most of the time, the stock market itself is the most leading indicator we have. I still prefer the yield curve and other hard data; not foolproof, but at least they comprise real prices reflecting real judgments made in real markets by real people putting real money on the line.
Sentiment (Why do they call them "consumers"? :confused: Know anybody who doesn't consume??? :rolleyes:) is not at all uninteresting, though. Commentators have been puzzling over why, despite all these wondrous ecostats ("low inflation", "low unemployment") we've been getting the past few years, people's overall attitude about their economic well being and level of approval with their political representation has been distinctly on the funky side. Well you put your finger right on it, El Bartos! "Money and credit growth of roughly 10%". Sheesh, no wonder the ecostats look a far sight better than real people feel! That's a whale of a lot of inflation, and inflation is one of those drug-like things that you have to keep ratcheting up the dosage of just to feel normal. All while it's killing you, of course. Government statisticians like to use dollars for measures for measures of wealth and economic well-being, but most people aren't fooled for long. Us real folk out here in real world eventually start reckoning our income and wealth in terms of how many bunches of broccoli and gallons of gas we can buy with it. And durn tootin’ we ain’t no 15% richer than we was five year ago!
No. To paraphrase that famous economist: "Inflation always and everywhere makes you poorer."
:D When it comes to fuzzy things like sentiment and confidence, my motto is the ol' tritism "watch not what they say, but what they do".
I'll see that and raise you:
"watch not what they say, but what they do that will lead you into the doodoo if you miss it"
That said, if it has any reliable tendency to lead the stock market, that's a real hat trick.
I didn't quote a longer term correlation because it's not great... but U. Mich. confidence did break in Oct. 2000, well ahead of the main break in 2001, and quite close to the peak in percentage terms. It has also been at least concurrent with most breaks since then... but has also been fooled ever since TIO operations became a major factor in 2005 or so.
Really all I'm saying though is that I think it has taken on a larger weight lately and, combined with recession opinions expressed by Gallup polls etc., that its a much bigger factor today than it has been for quite a while (years).
Most of the time, the stock market itself is the most leading indicator we have. I still prefer the yield curve; not foolproof, but at least it comprises real prices reflecting real judgments made in real markets by real people putting real money on the line.
True... but the yield curve is still sending the same recession signals. The TNX:IRX went negative again this week... and no comment on TBill Seclend effects too. :eek: ;)
Sentiment (Why do they call them "consumers"? :confused: Know anybody who doesn't consume??? :rolleyes:) is not at all uninteresting, though. Commentators have been puzzling over why, despite all these wondrous ecostats (l"ow inflation", "low unemployment") we've been getting the past few years, people's overall attitude about their economic well being and level of approval with their political representation has been distinctly on the funky side. Well you put your finger right on it, El Bartos! "Money and credit growth of roughly 10%". Sheesh, no wonder the ecostats look a far sight better than real people feel! That's a whale of a lot of inflation, and inflation is one of those drug-like things that you have to keep ratcheting up the dosage of just to feel normal. All while it's killing you, of course. Government statisticians like to use dollars for measures for measures of wealth and economic well-being, but most people aren't fooled for long. Us real folk out here in real world eventually start reckoning our income and wealth in terms of how many bunches of broccoli and gallons of gas we can buy with it. And durn tootin’ we ain’t no 15% richer than we was five year ago!
No. To paraphrase that famous economist: "Inflation always and everywhere makes you poorer."
I see you haven't lost your soothsaying abilities. :D
What is the FDI saying about current & recent inflation by the way? John Williams at shadowstats.com is showing slightly over 10% and I'm showing about 9.5%.
Finster
08-07-07, 05:41 PM
I didn't quote a longer term correlation because it's not great... but U. Mich. confidence did break in Oct. 2000, well ahead of the main break in 2001…
… and well behind the stock market break in March 2000 … [sass … sass …]
…Really all I'm saying though is that I think it has taken on a larger weight lately and, combined with recession opinions expressed by Gallup polls etc., that its a much bigger factor today than it has been for quite a while (years).
awww … now you went and had to make me agree with you …
True... but the yield curve is still sending the same recession signals. The TNX:IRX went negative again this week... and no comment on TBill Seclend effects too. :eek: ;)
Recession schmession. Official declaration of recession is about as reliable as official inflation numbers. Not to mention the folly of attempting to collapse an entire continuous spectrum of economic growth into a simplistic, binary, on-off proposition. And how do you know we’re not actually in "recession" (whatever that is) right now?
Just because the NBER hasn’t gotten around to declaring one yet? Please tell us you don’t really take your investment advice from ANY bureaucratic institution. At the very least, your tin-foil-stripes are in grave danger! :eek:
I see you haven't lost your soothsaying abilities. :D
What is the FDI saying about current & recent inflation by the way? John Williams at shadowstats.com is showing slightly over 10% and I'm showing about 9.5%.
Ratewise, it’s not a unique number because it depends on what time frame you use for calculation. But no matter how we slice it, it comes out far higher than the 1.9% or so that "core PCE deflator" registers! As of 2007 0725, total year-over-year was 9.437%. Sounds like you and I are not only in the same ballpark, but in the same seat. (Move over a little there, buster … ;-)
FWIW, even that high figure is down a little from recent past, so being as Williams’ figures are consumer-prices-only and therefore involve some lag, all three of us are at least in the same row ...
… and well behind the stock market break in March 2000 … [sass … sass …]
[mumble, mumble]... but it was within 6% or so of the actual top... *whimper*? ;)
Recession schmession. Official declaration of recession is about as reliable as official inflation numbers. Not to mention the folly of attempting to collapse an entire continuous spectrum of economic growth into a simplistic, binary, on-off proposition. And how do you know we’re not actually in "recession" (whatever that is) right now?
Just because the NBER hasn’t gotten around to declaring one yet? Please tell us you don’t really take your investment advice from ANY bureaucratic institution. At the very least, your tin-foil-stripes are in grave danger! :eek:
Good to see your finning attempts start up again. :-)
We could probably come up with some very "special" actual meanings for the NBER and their acts of legerdemain. It does have some value in characterizing a state of the economy, less recently after they went very complex with what a recession is and redefined it in what some think to be an Orwellian manner.
I actually do know we're in one right now, and by the old definition too - real GDP declines over multiple quarters.... but I did recently have to add a few layers to that erstwhile hat and fashion statement, if you must know.
http://www.nowandfutures.com/images/real_gdp2.png
Ratewise, it’s not a unique number because it depends on what time frame you use for calculation. But no matter how we slice it, it comes out far higher than the 1.9% or so that "core PCE deflator" registers! As of 2007 0725, total year-over-year was 9.437%. Sounds like you and I are not only in the same ballpark, but in the same seat. (Move over a little there, buster … ;-)
FWIW, even that high figure is down a little from recent past, so being as Williams’ figures are consumer-prices-only and therefore involve some lag, all three of us are at least in the same row ...
:eek: :D :eek: :D
Oh my... I am so tempted to make a crude comment about being in the same seat... ;)
That is really & truly wild about our numbers being so close. I actually looked up my full number on 8/1 and it's 9.442%... yoiks!
And yes, mine has been drifting down slightly too after having peaked in March around 10.37%.
This is a first - normally you & I are at least 1-2 full percentage points away from each other, sometimes I'm higher and sometimes you are and as you said, it's fully understandable since we're not measuring the same thing.... but sheeesh... being the same to two decimals is outrageous.
I think I need to change my formula, it's too scary... ;)
Finster
08-07-07, 07:52 PM
[mumble, mumble]... but it was within 6% or so of the actual top... *whimper*? ;)
Good to see your finning attempts start up again. :-)
We could probably come up with some very "special" actual meanings for the NBER and their acts of legerdemain. It does have some value in characterizing a state of the economy, less recently after they went very complex with what a recession is and redefined it in what some think to be an Orwellian manner.
I actually do know we're in one right now, and by the old definition too - real GDP declines over multiple quarters.... but I did recently have to add a few layers to that erstwhile hat and fashion statement, if you must know.
Caveats and semantics aside, we are quite copasetic on the underlying reality. Little question that real wealth and income have declined for the average American. This in spite of (or perhaps because of) that M3 growth. It is not consumption, but production; not money, but capital; that represents real prosperity. Too much of the imitation, and you inhibit and displace the real thing.
:eek: :D :eek: :D
Oh my... I am so tempted to make a crude comment about being in the same seat... ;)
That is really & truly wild about our numbers being so close. I actually looked up my full number on 8/1 and it's 9.442%... yoiks!
And yes, mine has been drifting down slightly too after having peaked in March around 10.37%.
This is a first - normally you & I are at least 1-2 full percentage points away from each other, sometimes I'm higher and sometimes you are and as you said, it's fully understandable since we're not measuring the same thing.... but sheeesh... being the same to two decimals is outrageous.
I think I need to change my formula, it's too scary... ;)
Just remember that those one or two percentage points still are far less than the difference between our figures and those of the pure fiction put out by officialdom. A big enough difference to facilitate the latter's denial about the real economic contraction in the US...
Yet it does not escape one’s notice that while our latest figures are within a hair’s breadth of each other, yours are ever-so-slightly higher. Never could resist a little one-upmanship, eh El Bartos? … :confused: :rolleyes: :p :eek: :cool:
Jim Nickerson
08-07-07, 08:35 PM
Being that you guys' figures are so close, it probably represents an error somewhere in either or both of your spreadsheets.:)
Caveats and semantics aside, we are quite copasetic on the underlying reality. Little question that real wealth and income have declined for the average American. This in spite of (or perhaps because of) that M3 growth. It is not consumption, but production; not money, but capital; that represents real prosperity. Too much of the imitation, and you inhibit and displace the real thing.
Indeed we are, and thanks for the fun and moments of levity during these ugly and sad times as the inflation crud and lies coming out of the Fed and D.C. and other central banks continue to take the country and planet down.
Just remember that those one or two percentage points still are far less than the difference between our figures and those of the pure fiction put out by officialdom. A big enough difference to facilitate the latter's denial about the real economic contraction in the US...
Yet it does not escape one’s notice that while our latest figures are within a hair’s breadth of each other, yours are ever-so-slightly higher. Never could resist a little one-upmanship, eh El Bartos? … :confused: :rolleyes: :p :eek: :cool:
Good point - I hadn't actually thought about our differences even at their maximum still being much lower than the real CPI and inflation lies. That is actually a small comfort, oddly enough.
And just for that, I just changed my formula (as I was to threatening earlier) and its now 9.424%... far be it for me to not acknowledge the king of <*something*> and the FDI too... :cool: :D ;)
Being that you guys' figures are so close, it probably represents an error somewhere in either or both of your spreadsheets.:)
Probably mine - Fin never makes misteaks...
Maybe the two spreadsheets are channeling each other? Shall I add a tinfoil hat for that computer? ;)
I'm thinking it is time to scan for Trojan horse/worms on one/both computers...:rolleyes:
Or (putting on my tin foil hat) maybe Mister Softee is duly exercising its part in the military/industrial black helicopter complex? All as part of Microsoft Updates?
I'm thinking it is time to scan for Trojan horse/worms on one/both computers...:rolleyes:
Good idea... I have thought a few times about my computer being a dog...
http://source-www.petco.com/Assets/product_images/0/039079038621B.jpg
Or (putting on my tin foil hat) maybe Mister Softee is duly exercising its part in the military/industrial black helicopter complex? All as part of Microsoft Updates?
A kindred soul! :eek: :D
http://www.nowandfutures.com/grins/Windowsvistamarketing.jpg
;)
Finster
08-08-07, 12:43 PM
Being that you guys' figures are so close, it probably represents an error somewhere in either or both of your spreadsheets.:)
:D As it turns out, Jim, Bart and I use very different methodologies based on different, independent, data. He draws on his expertise with monetary and credit aggregates, while my calcs use an array of global market price and yield data. So it's remarkable that our conclusions are usually within a percent or two (and sometimes even a few basis points...). That the official stats are so far removed from this consonant consensus is just one more thing that convinces us that they are little more than Orwellian fiction.
Bart -
With all the CB's "injecting liquidity" isn't this making M3 rise and as a result the entire money supply?
And isn't that also highly inflationary?
(trying to wrap my brain around what the long-term effect will be of the world's CB's actions of the past week.)
DD,
The liquidity injected would be inflationary except that it is only of very short duration.
In a few days or a week at most, it cancels out (i.e. loans are repaid)
Unless a new injection comes along...
Bart -
With all the CB's "injecting liquidity" isn't this making M3 rise and as a result the entire money supply?
And isn't that also highly inflationary?
(trying to wrap my brain around what the long-term effect will be of the world's CB's actions of the past week.)
c1ue has it - the recent actions, since they are only extremely short term loans, will not affect M3 or the money supply or inflation. M3 also does not directly contain any credit or loan elements.
i'm wondering if the fed's injections, even if made permanent, would be net inflationary in the face of what appears to be a huge amount of deleveraging going on across all markets. that is: can't the deflationary effect of the collapse of both overt leverage and the implicit leverage in a lot of derivatives outweigh fed injections? if so, is there a way to measure this and know [quickly] whether fed injections are sufficient to outweigh deflationary deleveraging?
i'm wondering if the fed's injections, even if made permanent, would be net inflationary in the face of what appears to be a huge amount of deleveraging going on across all markets. that is: can't the deflationary effect of the collapse of both overt leverage and the implicit leverage in a lot of derivatives outweigh fed injections? if so, is there a way to measure this and know [quickly] whether fed injections are sufficient to outweigh deflationary deleveraging?
I agree - the injections, even if they were permanent, are unlikely to outweigh the effects of the ongoing liquidity and credit crunch.
The piper must be paid, even if it isn't imminent. I'm slightly leaning towards a bounce before a larger US market break - aka "ka", for what its worth.
As far as measuring it, I'm unaware of any decent derivatives measure that's anywhere near close to current. All of them are quarterly or bi-annual.
The news and things like EJ's pickup of that 80% of PE and other "hot" financing having come from CLOs is about it.
And make sure you have your paddles: ;)
http://www.nowandfutures.com/grins/shit_creek.jpg
Jim Nickerson
08-14-07, 01:01 PM
I agree - the injections, even if they were permanent, are unlikely to outweigh the effects of the ongoing liquidity and credit crunch.
The piper must be paid, even if it isn't imminent. I'm slightly leaning towards a bounce before a larger US market break - aka "ka", for what its worth.
I agree with you, Bart, I think there is yet way too much bearishness and I think a lot of that will be punished before it may ultimately pay off to stick with being a bear.
vBulletin® v3.7.0, Copyright ©2000-2009, Jelsoft Enterprises Ltd.