Re: Money supply

[Steve Keen <s.keen@xxxxxxxxxx>]

I'm not sure whether this post was in response to something posted on Hayek
or PKT, so I'm cross-posting to both as well as to Mason.

When I said the money supply, I meant the money supply--not asset market
prices or gross valuations. The following is taken from:

http://www.federalreserve.gov/releases/H6

FEDERAL RESERVE STATISTICAL RELEASE

 H.6 (508)
 Table 1                  These data are scheduled for release each
Thursday at 4:30 p.m.
                                                                       March
21, 2002
 MONEY STOCK AND DEBT MEASURES
 Billions of dollars
 ----------------------------------------------------------------------------------------
      Date                   M11               M22              M33
      Debt4
 ----------------------------------------------------------------------------------------
 Seasonally adjusted
 ----------------------------------------------------------------------------------------
  2000-Jan.                   1123.3            4673.8           6573.0
     17434.9
  2000-Feb.                   1108.4            4690.9           6612.2
     17491.0
  2000-Mar.                   1108.9            4715.9           6670.9
     17596.4
       Apr.                   1112.0            4752.4           6713.6
     17695.0
       May                    1106.0            4759.8           6746.5
     17767.2
       June                   1106.4            4781.3           6799.3
     17852.9
       July                   1105.1            4802.9           6854.5
     17925.9
       Aug.                   1102.1            4837.0           6927.7
     17988.8
       Sep.                   1099.1            4869.0           6986.9
     18067.5
       Oct.                   1099.2            4886.7           7010.6
     18116.6
       Nov.                   1091.7            4901.3           7031.6
     18192.4
       Dec.                   1088.9            4942.3           7116.0
     18277.9

  2001-Jan.                   1095.8            4987.2           7213.6
     18327.0
       Feb.                   1098.9            5025.6           7279.5
     18401.7
       Mar.                   1107.4            5073.8           7331.7
     18496.6
       Apr.                   1109.7            5114.8           7433.3
     18575.8
       May                    1116.6            5138.7           7522.6
     18674.0
       June                   1125.6            5183.3           7607.9
     18766.9
       July                   1138.6            5224.1           7651.5
     18825.2
       Aug.                   1147.2            5265.1           7667.7
     18932.3
       Sep.                   1204.6            5383.6           7824.7
     19060.5
       Oct.                   1161.6            5373.2           7872.2
     19153.1
       Nov.                   1163.8            5417.0           7960.4
     19267.7
       Dec.                   1178.3            5458.9           8029.6
     19373.2

  2002-Jan.                   1181.3            5469.1           8029.7
     19425.5 p

The percentage changes over this two year period are respectively 5.16%,
17.02%, 22.16%, and 11.42%. M3 in particular has expanded dramatically, and
on my past statistics that show a roughly 2:1 ratio between Debt and M3 as
the Federal Reserve define them, I'm extremely suspicuous about the Debt
measure only growing at half the rate of M3; I think we may see some
serious revisions of this data as Enron and related corporate "spins" about
debt and off-balance sheet activities come home to roost.

Taking the growth of M3 as the more trustworthy indicator here, you have a
rate of growth of the money supply that is more than three times the rate
of growth of the economy, and over four times the rate of growth of M1.
Notice that most of this growth occurred after the stock market bubble
stopped rising (in April 2000), yet consumer prices have been relatively
stable and asset prices deflating. It's this sort of behaviour that I think
both raises interesting questions for money supply theorists.

Cheers,
Steve

At 08:02 AM 23/03/2002 Saturday, you wrote:
> William,
>
> I noticed Steve Keen type:
>
> " the huge expansion of the money supply in the USA "
>
> I'm not certain what "money supply" he has in mind but the
> context suggests to me the stock market.
>
> Elsewhere I noticed, in an article by an economist, a mention
> of the unexplained huge disappearance of money when the
> stock market fell.  And elsewhere I've heard comments such as,
> "no one knows where all that money went" when the stock
> market went down.
>
> I don't know what the money supply has been doing this
> last decade, but does any *accepted* definition of "money"
> include the market value of the stock market?  Surely that
> value is subject to change with a minuscule quantity of trading.
>
>        Mason C

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