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Money Supply Again - TMS

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July 15, 2008 – Comments (6)

Mish has an interesting post looking at TMS money supply and he questions the usefulness of M3. 

I had not followed this "True Money Supply" and it does look superior.

He also brings up a very good point that many businesses have seen that the economy is tightening and they've tapped their line of credits and put the money into deposit accounts which increases M3.

This is going to be very interesting to see how it plays out over the next couple years.

6 Comments – Post Your Own

#1) On July 15, 2008 at 2:37 PM, dwot (44.40) wrote:

I like looking at Mike Hewitt's stuff.  I don't think he has written in quite some time.  How fitting, today one pops up on money supply.

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#2) On July 15, 2008 at 3:40 PM, DemonDoug (32.27) wrote:

Deb, Mish is putting a square peg into a round hole.  He is trying everything he can to fit the data to equal deflation.  He and a fellow deflationist basically made up a new way to measure money to fit his theory.

Doesn't make it right.  And he is correct about the increasing deposit accounts.  This is what happens in inflation, when financial institutions take some of the money that would be cycled around in the FIRE economy and put it in the available reserves for the P/C economy.

But since we never see Mish talking about the FIRE economy, it's quite obvious he is purposefully ignoring anything that wouldn't fit his theory.  Recently he posted about people who emailed him about FNM and FRE bailouts, wouldn't they be inflationary - and he basically brushed it off and said with the losses any bailout won't be able to make up for the lost money.

What a crock of BS!  The bailouts are completely inflationary, as every dollar for them is completely new!

Now I don't want to hate on Mish too much - outside of his unhealthy obsession with proving himself right when he is obviously wrong, his analysis on banking and financial stocks, as well as his thoughts on companies like GE and GM have been spot-on.

I mean when you have to make up your own money supply measures to prove yourself right, how much are you really stretching?

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#3) On July 15, 2008 at 3:57 PM, DemonDoug (32.27) wrote:

Wholesale Inflation Rises by Fastest Rate in 27 Years

But of course you won't see Mish talking about this.

Deb, Mish is a great, great stock and financial analyst. Recent posts on Citi's 1.1T off-sheet assets, Bernanke being a moron, at-risk uninsured deposits, and now digging and talking about shorting curbs on the GSE's.  This is great analysis!  But you won't ever see him say "hmmm, well here is some inflationary evidence."

He either doesn't understand, or, more likely, is just too stubborn to admit that it is inflation and hence like I said, square peg in round hole.

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#4) On July 16, 2008 at 9:52 AM, AnomaLee (28.75) wrote:

Mish needs a dictionary, but at least Mish has made the right recommendation under the wrong assumptions advocating commodities.

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#5) On July 16, 2008 at 10:44 AM, dwot (44.40) wrote:

Doug you should send me an email, we should get into this more.

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#6) On July 16, 2008 at 11:16 PM, FourthAxis (< 20) wrote:

Check D's blog, we've been arguing this for a hot minute now.  I'm also a fan of Mish's perspective. 

I gotta say though, with the bailout of F&F we're about to bake much more monetary inflation into the cake.

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