The Monetary Hurricane
Monetary Watch December 2010: The Money Supply, a Triple From Here?
by Michael Pollaro
Our monthly Monetary Watch, an Austrian take on where we are on the monetary inflation front and what’s next…
Headline Monetary Aggregates in November
The U.S. money supply aggregates based on the Austrian definition of the money supply, what Austrians call the True Money Supply or TMS, were mixed in November, with our shorter-term one and three-month rate of change metrics continuing their recent surge while our longer-term twelve-month rate of change metrics showing some moderation. Focusing on TMS2, THE CONTRARIAN TAKE’s preferred money supply measure, we find that it increased at an annualized rate of 15.6% in November, bringing the three-month rate of change to an annualized 15.2%. That’s up from October’s 14.5% rate and 13.3% rate, respectively. In contrast, the twelve-month rate of change metric on TMS2, the measure we watch most closely, went the other way, ending November at a rate of 9.8%, down from October’s 10.5% rate, and marking the end, albeit barley, of 22 consecutive months of double digit increases.
As has been the case throughout 2010, M2, the mainstream’s favorite monetary aggregate, continues to show subdued growth, in November posting a year over year rate of increase of 3.1%, down from October’s 3.2%. As readers of this site are aware, THE CONTRARIAN TAKE posits M2 as a grossly misleading measure of the money supply, meaning the gap between the true and the perceived rate of monetary inflation is a healthy 6.7 percentage points.