Unusual to see this level of understanding in the mainstream business press: Money, It’s a Gas (CNN.com): “The wall of money bearing down on the economy has begun to hit. We’ve known it was coming for a while. The shift in Fed policy from promoting disinflation to fanning the flames of inflation, the outsized tax cut by Washington, the easing tensions in the financial markets were clear enough signals. The effects of this stimulus are beginning to show up in the Federal Reserve’s weekly report on the nation’s money supply. Northern Trust chief U.S. economist Paul Kasriel points that M2 (money held in currency, travelers checks, demand deposits, savings accounts and retail money market funds) has been growing at a compound annual rate of 11 percent over the past three months. That’s the quickest pace since the fall of 2001, when the aftermath of the September 11 attacks caused an artificial jump in the nation’s money figures. “It’s growing rapidly, and it does suggest that we’re going to see at least a temporary pickup in economic activity,” said Kasriel. More than anything, the jump in money supply is about the Fed. Thanks to its signal that it doesn’t plan to raise rates anytime soon, banks have been incredibly active, lending money to people who want to buy houses, loading up on the tradable baskets of mortgages called mortgage-backeds and, increasingly, lending money to the indebted government. This has put upward pressure on banks’ demand for money, which the Fed is happy to hand out to them at the bargain-basement rate of 1 percent. ... The real question now is if the economy will have more than a brief growth spurt. Money is nice, but unless companies begin to spend and, more importantly, hire, its effects may only be temporary.
Money, It’s a Gas
