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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:

http://research.stlouisfed.org/fred2/series/BASE

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:

http://www.zerohedge.com/article/and-meantime-adjueted-...

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