"Reasons for Optimism"

Last I looked, the talk was of a double-dip recession. But at the Businomics Blog, Bill Conerly doesn't just repeat the talk. That makes him interesting.

I'm taking a quick look at Reasons for Optimism on the Economic Outlook: 2011 second half and 2012 first half. Conerly writes:

We finally have the money supply growing as it should.

So I took a look at what FRED shows:

This is a short-term graph (only since 2006) and the values are indexed to group the trend-lines together and maximize visibility. Looks like all three money measures have been expanding since mid-2010.

Conerly writes:

This money supply growth was accompanied by loan growth, believe it or not.

So I took a look at what FRED shows:

This is a longer-term graph (since the 1980s) and again the values are indexed to save space. The blue is "commercial and industrial" loans. The red is "consumer credit".

Looks like the fall of consumer credit since 2008 was out-of-character. A measure of the severity of the downturn, I suppose.

Commercial and industrial loans rise and fall with more regularity, attuned to the business cycle.

What I like about this graph is that both trend-lines have turned up -- and that the turning-point seems to have come much sooner this time than than it did after the two previous recessions.

Conerly writes:

How long until the money supply increase pushes the economy upward? I often use a rule of thumb of 12 months... Right now I believe the time lag will be shorter, more like six to nine months. That's grounds for some optimism in fourth quarter 2011, with even more optimism for the first half of 2012.

It's nice to read something like that, once in a while.