This is the most alarming thing I have seen all year. That massive spike on the right? That’s not a data error, that is happening RIGHT NOW. The money supply has almost DOUBLED in under a fiscal year.
Like the guy said at the source, we have never been here before. How on earth is a person supposed to plan around this? Why in the hell hasn’t the Fed learned a goddamn thing in the last 30 years? Why can’t we elect representatives who aren’t economically illiterate?
I forthwith tender my resignation as Pollyanna! You may begin to panic NOW.
gator | 25-Jan-09 at 5:45 pm | Permalink
And then there’s this.
On a tip from Bruce.
Ahab | 26-Jan-09 at 2:57 pm | Permalink
Thanks for ruining my afternoon.
TJP | 31-Jan-09 at 1:58 pm | Permalink
You know those “stimulus” payments we received during the last administration? Yeah, well they were more of a short term, involuntary loan than a tax cut. You see, since federal spending wasn’t reduced by canceling projects, firing people and eliminating positions, the shortfall was made up by borrowing. Now it’s being done again, but it’s an order of magnitude larger.
Like Tam K said, they’re trying to build a wall by taking bricks from the bottom and placing them on top.
Steven Den Beste | 31-Jan-09 at 10:47 pm | Permalink
Things aren’t quite what you think they are. The Fed is trying to prevent deflation, and what they’re looking at is that the “velocity of money” (which is to say, how often a given dollar gets spent per year) has plummeted in nearly that same period. The only way to prevent a huge liquidity crisis followed by a huge spike of deflation is to pump currency into the system.
http://research.stlouisfed.org/fred2/series/MULT
Basically, if the money isn’t moving very fast, then there needs to be a lot more money out there in order to keep things going at all.
It may cause inflation later; indeed it’s likely it will cause some. But not as much as you seem to be thinking it will, and when the time comes it can be dealt with. Deflation, on the other hand, can be terribly debilitating and once it settles in it can really be hard to break. Think “1990’s Japan stagnation” for an example. Or think of the Great Depression.
That’s what the Fed is trying to prevent. They’ve reduced interest rates to just about zero, and they’re pumping currency into the system like mad, in hopes of preventing the system from freezing up.
Or so I understand it.