I sense that readers of this blog are desperate to get into a serious discussion about money. Since it is a quiet bank holiday and the rain has ruined my plans for today, I thought I should start today.
The chart above highlights two key indicators. The first is M4 growth, which is a broad measure of monetary growth comprising of cash, retail and wholesale bank deposits. This data largely comes from the liabilities side of bank balance sheets. However, M4 has a counterpart on the asset side of bank balance sheets, which is called M4 lending.
Here are two quick observations from me. First, I can't see any slowdown in either indicator. The data goes right up to March 2007, and both indicators are growing at double digit rates. Second, take a look at the period when we last had a housing crash - the early 1990s. Prior to the crash, both indicators were growing extremely rapidly. Then comes the crash and monetary growth slips down in to the low single digits.
So, where is the credit crunch? On the face of it, it is hard to see it in the broad money growth numbers.