[ExI] M0 singularity... you're soaking in it

Damien Broderick thespike at satx.rr.com
Sun Jan 25 04:34:03 UTC 2009

Look at the chart at the site:


The author comments:

<...I can't believe what is happening in narrow money. M0, the 
narrowest measure, is usually called the monetary base. It is simply 
currency (coins and paper dollars) in circulation and in bank vaults 
plus reserves commercial banks have on deposit with the Fed. These 
reserves are critical because they are the base from which all other 
forms of money such as checking accounts are created. The monetary 
base directly controls the ultimate size of fractional-reserve banking.

Until late 2008, I hadn't looked at M0 for years. Why? Even the Fed 
isn't foolish enough to change it too much. For decades it has 
traveled in a tight range between about 2% and 10% annual growth, 
with a pre-panic average since 1960 of 6.0%. M0 growth less real 
economic growth is one of the most basic measures of inflation. If M0 
grows at 6% and the underlying economy at 3%, then there is 
relatively 3% more money available to spend on goods and services. 
This is inflation.

I was reading a book last month that discussed the monetary base's 
direct impact on inflation. So I decided to take a look at M0 again. 
I could not believe what the data showed, I almost fell out of my 
chair it was so mind-blowing. Per the Fed's own data, we have just 
witnessed the most inflationary event in modern history. This crazy 
monetary base chart will make even the most rabid deflationist very uneasy.


M0 has gone parabolic! Year-over-year in December 2008, it was up 
98.9%! This is so shocking it defies belief. In late September as the 
stock panic started, it had grown by 9.9% over the past year. By 
October, this rate ballooned to an all-time high of 36.7%. In 
November, it rocketed again to 73.0%. And in December, it surged up 
to the staggering 98.9% you can see above. Ben Bernanke's Fed has 
doubled the monetary base in a single year! Holy cow. > 

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