Jim Bradley

Inflation or Deflation? How to Tell

Jeff - The increases of transactions money (M1) is not flowing through the system to generate new deposits (which are show by the graphs above), so there's an effect in M1 which isn't being fully transmitted. While the rate of M2 growth has been high, it is slowing, not increasing. See M1 at research.stlouisfed.or... and M2 at research.stlouisfed.or...

The bottom line effects are mixed, but I believe the recent monetary changes will show a pop in inflation, then it will settle down later. If recent data holds, it already is.

On Sep 09 12:55 PM JeffDB wrote:

> "First question is then, is money (cash plus deposits) rising or
> falling?
>
> Answer: it is rising slowly."
> ------
>
> But according to the Fed's numbers, M1 (Cash in circulation + Current
> Deposits Held by Money Holders at the commercial banks) www.federalreserve.gov...
> has gone up 19.9% year over year, which I would consider rising a
> bit more than "slowly".
>
> M1 (billions of $) research.stlouisfed.or...
>
> 1383.3 8-16-08
> 1658.2 8-17-09
>
> Graph: www.scribd.com/doc/193...
>
> If you add in (All types of Deposits Held by Money Holders at commercial
> banks) - ie money market funds, etc. we would have M2 which as risen
> a little in excess of 8% year over year, which I would also consider
> a little above "rising slowly".
>
> 8312.4 8-17-09
> 7691.4 8-18-08
> 621 / 7691.4= .0807 increase year over year
>
> research.stlouisfed.or...
> Graph: www.scribd.com/doc/193...