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There’s a reason you are scared of QE2 | Advantage zyaada

But to be scared of Inflation is a death knell for growth

That’s our fact since we started this joyride watch in August 2008 at http://zyakaira.wordpress.com and advantages.us portals. Here are the liquidity raising facts for the QE2 coming, thanks to seekingalpha writer “Calafia Beach Pundit” also reiterated by the UK shadow cabinet. ( You should get Reuters Insider, they are goood, and i’m listening to Power 106 FM while I’m penning this from good old home )

All measures of money are growing at significantly positive rates. Over the past 6 months, M1 is up at a 10.4% annualized rate;

CPI / PPi courtesy Seeking Alpha - " Calafia Beach undit"

M2 is up at a 6.5% annualized rate; MZM is up at a 7.3% annualized rate; and currency in circulation is up at a 6.6% annualized rate.

The nominal increase in M2 since the onset of the financial crisis in Sep. ’08 is a whopping $945 billion; currency in circulation has surged by $128 billion; and required reserves for U.S. banks have expanded by over 50%.

This adds up to solid evidence that some portion of the $1 trillion that the FOMC has pumped into the banking system is being used to create new deposits and loans.

For comparison, we in India choke when M2 falls to 16% (!) and M1 albeit is I think stable at targeted and

Chart of M2 money velocity and employment-popu...

Image via Wikipedia

achieved 17% for March 2010 and March 2011. Of course M1 increases when spending increases and thus stimulates demand but it also increases in spending linked to anticipated inflation ( In that it has kept same store sales in USA up since mid 2009) But we say the higher M1 and M2 is also a desired higher growth rate, in fact the correlation will be higher for the US where Consumer spending is 3/4 ths the GDP than for China where it is 50% and India where it is a measly 35% (or less)

So there. We said it Mr Bernanke, you are in good company.

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5 comments on “There’s a reason you are scared of QE2 | Advantage zyaada

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  5. Ed Joor
    July 5, 2011

    Super job on the write-up. Countless thanks for sharing it with us, you need to have gone via a great deal of work to complete it so well.

    Like

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This entry was posted on October 27, 2010 by in Amitonomics, Banking, Retail Lifestyle, US and tagged , , , .

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