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Minyan Mailbag



Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.

Professor Succo,

How come no one is talking about the recent massive increases in M-3? I'm not sure what is causing this, but it certainly looks as though the fed is printing money like crazy. I read somewhere that the recent increases in M-3 are running at 30% annualized.

Minyan Jim

Minyan Jim,

Last week the money supply as measured by M-3 grew $60 billion; this annualizes out to around a 32% growth rate. Anything above 10% is abnormally high, while anything below 5% is abnormally low.

One week does not make a trend, so while no one is saying anything yet, you can bet that we are watching.

The growth of the money supply year over year (from last May) has grown around 5%, within the realm of normal. But there has been a decided pick-up since the beginning of the year: last month it grew at around 12%.

Given the "stop and go" pattern of the money supply growth, I suspect much is going on behind the scenes. The Fed seems to be trying to wean the economy off of free money, but also seems to be having difficulty doing so. I have written on the why of this several times, so no need to go into it again.

Suffice it to say that there is evidence that every time the Fed tries to slow its printing of money, for some reason it starts up again.

Do they see what we feel?

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