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Money Supply Update – Still No Inflation Here Either…



June 21, 2012 – Comments (3)

Completely agreed


Money Supply Update – Still No Inflation Here Either…
21 June 2012 by Cullen Roche

It’s abundantly clear by now that the many hyperinflation and even high inflation theories following the various government policies after the financial crisis, have been entirely wrong.  While this has become very clear in recent CPI readings it’s also apparent in many independent gauges.  For instance, the Billion Prices Project is now showing inflation crashing down to just 1.5%.  This has been a superb indicator of inflation and if it holds true to trend the CPI isn’t turning up any time soon.  See Figure 1 below.

Equally interesting is the broader money supply indices.  While the government stopped tracking M3 long ago, some independent sites still track it.  What does it show?  The same trend in the broader inflation indices.  M3 is plunging lower in both of the widely followed independent M3 indices.   This is all worryingly reminiscent of Japan….

(Figure 1 – Billion Prices Project

(Figure 2 -Via

 (Figure 3 -via Shadow Stats)

3 Comments – Post Your Own

#1) On June 21, 2012 at 1:26 PM, outoffocus (23.66) wrote:

Real inflation cannot come unless one of 2 things happen:

1. We get rapid wage growth (highly unlikely)

2. The dollar collapses (the jury is out on that one)

In the mean time we are just going to have a modified form of stagflation where consumer prices go up (due to dollar weakness or whatever).  I doubt gas prices will be falling for much longer.  In another year they will probably be back up to $4. 

I would like to believe that deflation would be allowed to happen but we all know thats to much like right.  So we'll just meander along until something extreme happens. 

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#2) On June 21, 2012 at 7:35 PM, Frankydontfailme (27.22) wrote:

And I don't disagree with you. However, if you want to argue (which I believe you do) that the fed's stimulus is not inflationary because it expands excess reserves and not bank capital, then the lack of recent price inflation doesn't provide any evidence. The fed has simply stopped printing money! So of course inflation has been non existent.

 The hyperinflationary argument is that the fed will eventually print money because of the deflationary tailspin. See, what I'm getting at? Even a hyperinflationist would look at the data you presented and declair, "duh."

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#3) On June 22, 2012 at 10:55 AM, binve (< 20) wrote:

outoffocus ,

Agreed with 1, rapid wage growth is unlikely. As to the Dollar collapsing, it seems to me like the commonly cited reasons for such a collapse don't make sense and in and a collapse is unlikely to occur. I also don't see consumer prices going up significantly. Producers don't have pricing power because demand is so weak. The exception being oil where OPEC really can set prices so long as they gauge demand approximately correctly. But even now it seems like oil inventories are still rising because demand is falling faster than the already booked supplies. But, yes, I agree that OPEC being the marginal price setter will repsond to the current supply/demand dynamic and adjust prices to their quotas and that $4 gas (or thereabouts) will likely be in our future for awhile.

Frankydontfailme ,

The fed has simply stopped printing money! So of course inflation has been non existent. The hyperinflationary argument is that the fed will eventually print money because of the deflationary tailspin.

This is the same basic arugument that has been applied to Japan for 20 years now. They had a bubble and demand collapses due to private sector debt levels. Government deficits increase dramatically to prevent aggregate demand from reaching depression levels. All the while the BOJ tries quantitative easing and other asset swaps to get lending going. So according to your logic, they simply 'stopped printing money' too. Yet people are *still* warning of the pending hyperinflation in Japan. So after 20 years, this mythical money printing is just about to happen? Or have the bond vigilantes been asleep at the switch for 2 decades and are now waking up? Or that the 'private citizens will stop funding the governement' (or other such nonsense claims)?

With government spending at levels that just barely support aggregate demand at levels to have nearly flat nominal GDP growth, where is the cause for the hyperinflation going to come from?.

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