Wednesday, October 19, 2011

Just a Glimpse

From mine of the 10th, with comments about the blue line on the graph:
In the U.S since 2008, base money has tripled...

Graph #4, Source: Paul Krugman

Actually, Ben, it looks like you thought you could double the money and be done with it (in 2008) but then you waited and it didn't work, so you tried another 50% in 2009 and waited to see if that worked, and when it didn't you tried another 50% boost in 2011. That's sure how it looks to me.

From John C. Williams, the dates of quantitative easing:
From late 2008 through March 2010, the Fed bought $1.7 trillion in such instruments. Then, in November 2010, we announced we would purchase an additional $600 billion in longer-term Treasury securities by the end of June 2011.

From FRED, three graphs. I've added the QE dates from John Williams.

Graph 1: Base Money

Graph 2: Prices

Graph 3: Interest Rate


nanute said...

Never question the Fed:) As we've discussed previously, it doesn't make much difference how much the money supply is increased, if it doesn't circulate.I'm not sure I agree with your contention that the Fed can't effect M1. (Though it certainly seems that way.)

The irony is that interest rates are down, CPI is up, and the banks aren't lending. What a paradox! I think Uncle Ben needs to figure out a way to bypass the banks, and put the money directly in the hands of consumers/underwater borrowers. Oh wait, that's fiscal policy.

jim said...

Hi Art,

If debt is money, prior to the Great Financial Train Wreck there was new money created at an annual rate of $5 trillion and growing.

US Total Debts in trillions $$

1997 20.60
1998 22.48
1999 24.62
2000 26.41
2001 28.46
2002 30.73
2003 33.53
2004 36.49
2005 39.88
2006 43.84
2007 48.24
2008 51.63 *54.03
2009 52.47 *60.51
2010 52.09 *67.77
2011 52.95 *75.90

* What TCMDO would be if growth trajectory had continued at the same rate

In the last 3 years there has been little new money created though credit expansion. The $23 trillion in debt that would have happened if there had been no GFTW makes what the FED has done look like peanuts.