Money Supply & Revolving Credit Debt Plunge
In September of last year there was a sharp money supply growth deceleration. The 12-months rate of growth in M2, at 3,6%, year-over-year, was at the lowest level since 1995 and the 13 week percentage change of MZM had just turned negative.
As a result of the decline in the rate of growth of money supply, 'excess money', as defined by the growth in money supply in excess of nominal GDP, had over the previous 18 months also plunged.
What the hell does that mean? The non-M1 components of M2 are primarily household holdings of savings deposits, time deposits, and retail money market mutual funds. Usually, when money supply growth slows down so rapidly and when 'excess money' plunges, the economy follows with a brief time lag.
We have been seeing those results since just before the election till now...more evidence of that follows...
Near the end of 2004 (November), revolving credit stood at $782.15 billion as stated by the FED. That's a whole lotta credit card debt. But in November 2004, as large as $782 billion sounds, it's actually an 11% annual rate decline from October, the single largest one-month drop since the Fed began keeping records in 1968.
So what does this all mean?? Put two and two together and:
The M2 money growth decleration tells us that John Q Public has less spare cash on hand. The revolving credit annual rate decline tells us, he has stopped spending money he does not have.
See: Fed Revolving Credit Report
http://www.federalreserve.gov/releases/g19/20050107/
More info at: http://www.federalreserve.gov/releases/h6/about.htm
As a result of the decline in the rate of growth of money supply, 'excess money', as defined by the growth in money supply in excess of nominal GDP, had over the previous 18 months also plunged.
What the hell does that mean? The non-M1 components of M2 are primarily household holdings of savings deposits, time deposits, and retail money market mutual funds. Usually, when money supply growth slows down so rapidly and when 'excess money' plunges, the economy follows with a brief time lag.
We have been seeing those results since just before the election till now...more evidence of that follows...
Near the end of 2004 (November), revolving credit stood at $782.15 billion as stated by the FED. That's a whole lotta credit card debt. But in November 2004, as large as $782 billion sounds, it's actually an 11% annual rate decline from October, the single largest one-month drop since the Fed began keeping records in 1968.
So what does this all mean?? Put two and two together and:
The M2 money growth decleration tells us that John Q Public has less spare cash on hand. The revolving credit annual rate decline tells us, he has stopped spending money he does not have.
See: Fed Revolving Credit Report
http://www.federalreserve.gov/releases/g19/20050107/
More info at: http://www.federalreserve.gov/releases/h6/about.htm
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