Inflation With No Growth in M1 For 3 Years in a Row?

by: Mark J. Perry

There's been a lot of talk and discussion recently about inflation and fears of future inflation, but not a lot of focus on the main and necessary ingredient for inflation: the supply of money.

The top chart above shows that the growth in M1 has been close to 0% for about the last 30 months, since early 2006 (percent change from a year ago). The bottom chart shows M1 growth for the last 50 years.

Bottom Line: Maybe I am missing something, or maybe inflation is no longer a "monetary phenomenon," but if we do have rising inflation in 2008, it would be the first time in at least half a century, and maybe ever, that we had problems with inflation accompanied by NO growth in M1 for three years in a row.