Sunday, July 31, 2011

Japan versus USA (3)

This graph shows the trends of M1 money growth for the US and Japan, each expressed as a multiple of its 1980 value. (In other words, I make both trend-lines start at the same level. This way, we can compare changes of the two lines.)

The blue line shows money in the U.S. There is a small hump in the money line around 1986, and a bigger one around 1992-1994. I have showed these two increases before.

In mine of 14 July, The Rise and Fall of the Non-Federal Relative, Graph #6 shows the two increases. Granted, discussing that graph I noted only the 1992-94 increase. But later, under Graph #9, I challenged you to investigate "two other times in the 1980s when the growth rate of M1 money exceeded the growth rate of total debt".

Three humps, total. If you look closely at the graph above, you may see a tiny hump between the years 1982 and 1984. That and the 1986 hump are the two I thought you might poke with a stick. The 1994 hump I've got covered.

Anyway, after 1994 Japan's M1 started growing faster, and U.S. M1 growth slowed. And you can see, after 2008 on the blue line, the ominous start of an increase similar to Japan's after 1994.

1 comment:

Jazzbumpa said...

For all of Japan's money growth, their economy underperformed ours for most of the period indicated.

I've grown quite skeptical of the power of monetary policy. Of course, Japan has been at or near the 0-interest bound for a couple of decades now, and that is the region where monetary policy becomes very weak.