The Bank of England might be worried about inflation, but that has not stopped the printing presses. During the last 12 months, the money supply increased by just over 10 percent. Since December, there are tentative signs of deceleration, but the growth rate has a long way to go before it is consistent with a 2 percent inflation target.
Remember the famous words of Old Man Friedman - "Inflation is always a monetary phenomenon".
2 comments:
money, money, money, more money, funny, money, worthless money.
I still find M4 bemusing... I'm not sure I trust the statistic as being relevant to the real economy.
I wonder, for example, what effect bringing SIVs back on-balance sheet may have? I wonder if the credit crunch is lagged by this metric: I wonder if we will see a contraction in M4 to match the contraction in credit - but only after 12, 18 or 24 months, say? I wonder what proportion of that M4 is actually a margin on a credit derivative trading account?
In summary, I don't think M4 on its own tells us very much.
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