Here.
So what exactly does this mean?
Is this a sign that output has adjusted and we're at a new depressed equilibrium, or is this a sign that investment is about to pick up? Did "bad" just get normal, or are we getting ready to heal on our own?
Saturday, June 9, 2012
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That is interesting. I don't know if you noticed, but M2 also shrunk a bit this past month. While I am not entirely sure what is happening (these are strange times), I do know that firms aren't hoarding cash in their account anymore, but also that whoever is getting that cash is not depositing it. My guess would be that investment is occurring, but not so much in the US. Europe seems to be a good candidate.
ReplyDeleteNo I did not notice that, and I think you're right - these two things are probably good to see together.
DeleteI usually need to see the next month or so after a change to get a better idea of what is going on. Sometimes money changing hands doesn't show up right away and you end up seeing money supply dip a bit, other times you see no real change, and then other times the lending process causes an increase that hides things. There are a lot of variables, usually something shows itself a month or so later and you're like, "ahh! that's what it was". Then again, sometimes you never figure it out, but that's ok, too.
DeleteUsually, when I see money supply decrease over the course of a few months, that tells me that money is leaving the system and going elsewhere (the calling in of loans certainly isn't an issue right now). Thus far, these movement are still new, so only time will tell.
Daniel_Kuehn, would you say that cash hoarding is evil (or whatever functionally equivalent term you use in order to technically avoid moralizing)? How long do you think someone should be allowed to hold on to an average dollar they get before spending it?
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