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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 and 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.


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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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