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Reply #16: I would have to disagree there [View All]

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notesdev Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Apr-24-11 11:35 PM
Response to Reply #10
16. I would have to disagree there
Edited on Sun Apr-24-11 11:37 PM by notesdev
the chart you posted is the money multiplier, not M1, and while it does indicate the lowest monetary velocity ever recorded, there's a flip side to that chart:

That's the monetary base. Notice that it's going parabolic, rising a good deal faster than MULT has been falling. MULT has actually been in a pretty tight range while the HUGE spike in BASE has been going on.

Some simple math... since the shock (the vertical jumps on each graph) MULT has gone from ~1.6 to 0.76; dropped by a little more than half.

On the other side of the equation, the monetary base went from ~$850B to $2600B, or more than tripled.

Our monetary base therefore is rising at a rate 50% higher than MULT has fallen. And if you calculate by post-shock numbers (start after the shock jump rather than at the start of it) it is a good deal worse; MULT has only fallen by about 12% since then while BASE has jumped by over 60%. In other words, the situation is getting worse, not better. They are overpowering the drop in MULT by sheer volume of money printing.

edit: The chart at this link shows more detail on what is going on with BASE:

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  -Don't Like a Weak Dollar? Might as Well Get Used to It The Northerner  Apr-24-11 07:04 PM   #0 
  - Don't get too used to it  notesdev   Apr-24-11 07:05 PM   #1 
  - Trouble is that employers won't match the weakening of the dollar with corresponding wage hikes  MadHound   Apr-24-11 07:08 PM   #2 
  - why future tense  notesdev   Apr-24-11 07:11 PM   #4 
  - Well, with the weaker dollar  Abq_Sarah   Apr-24-11 11:19 PM   #12 
  - I do! And I'm building my garden as fast as possible  WhiteTara   Apr-24-11 08:20 PM   #9 
  - The Bush tax cuts and the Obama extension of these cuts..  girl gone mad   Apr-24-11 07:11 PM   #3 
  - eh?  notesdev   Apr-24-11 07:17 PM   #5 
     - +100  The Northerner   Apr-24-11 07:25 PM   #6 
     - If taxes were raised, then we wouldn't need to QE and interest rates would  Exilednight   Apr-24-11 07:26 PM   #7 
     - Quantitative easing had the net effect of an asset swap, nothing more.  girl gone mad   Apr-24-11 09:43 PM   #10 
     - I would have to disagree there  notesdev   Apr-24-11 11:35 PM   #16 
     - Here's another chart which makes the point.  girl gone mad   Apr-24-11 11:29 PM   #14 
        - More importantly what was different  notesdev   Apr-25-11 07:52 AM   #20 
  - Recommend  xchrom   Apr-24-11 07:53 PM   #8 
  - recommend  Poboy   Apr-24-11 11:09 PM   #11 
  - K&R  crickets   Apr-24-11 11:25 PM   #13 
  - Running 1.5T deficits is not free  taught_me_patience   Apr-24-11 11:33 PM   #15 
  - Hey, if it devalues enough..  LetTimmySmoke   Apr-24-11 11:39 PM   #17 
  - Optimistically, it will make US exports cheaper abroad...  whoneedstickets   Apr-24-11 11:48 PM   #18 
  - We should just use the Euro and get it over with.  Initech   Apr-25-11 12:01 AM   #19 

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