Presentation on theme: "The Money Supply and Inflation By Daryl Montgomery May 14, 2008 Copyright 2008, All Rights Reserved."— Presentation transcript:
The Money Supply and Inflation By Daryl Montgomery May 14, 2008 Copyright 2008, All Rights Reserved
Global Inflation Rice goes up 50% in a two-week period in Asia, 120% in one year, wheat 65%. Global food prices up 57% YoY. Food prices up 21% in Q in China. Food prices up 6% in March in Eurozone. Oil up 105% YoY. U.S. gas prices up 21% YoY. Imported goods prices in U.S. up 14% YoY.
Money Supply Growth/Inflation MZM (forms of cash) – Up 38% annual rate in Q1 M3 (broadest measure) – Up 18% annual rate Q1 Many top economists and top blogsters claim these numbers do not indicate inflation! In the U.S. in the 1970s: 1. M3 growth peaked at 16% in 1971(now 20%) 2. PPI peaked at 36% YoY in CPI was up 11% YoY in U.S. CPI later peaked at 14% YoY in Using the same methods to calculate CPI as were used in the 1970s, CPI is now 12%. (not 4% as the U.S. government claims).
M3 Money Supply – Rate of Change 2004 to 2008
Long-Term M3 Money Growth
Money Supply and Inflation Link 10-Year Moving Average of Rate of Change
CPI - Calculated as it was in the 1970s Compared to Official Figures
GDP Adjusted for More Accurate CPI
Summary of New Fed Programs Feds TAF (term-auction facility) 1. Cash in exchange for bonds. 2. Started at $40 billion per month in December. 3. Raised to $60 billion per month January. 4. Raised to $100 billion per month in March. 5. Raised to $150 billion per month in May. Feds TSLF (Term Securities Lending Facility) 1. Treasuries swapped for non-tradeable mortgage bonds (MBSs) 2. Started in March with goal of up to $200 billion. PDCF (Primary Dealer Credit Facility) 1. Overnight funding for non-banks, almost any bond with a market price is accepted as collateral. 2. Started in March, funding unlimited.