Money & Credit Supply – April 2010

posted by Nima

May 18, 2010 · Posted in Monetary Economics

In April of 2010 the annual growth rate of the true money supply has dropped to 3.68%.

The total true money supply at this point is $2,214 billion:

The money supply growth rate continues to move sideways and even appears to be on the verge of falling once again. One thing’s for sure: There is no extraordinary growth happening in the money supply, regardless how how many nonsensical purchase programs the Fed has started and how much “quantitative easing” it is trying to shove down people’s throats.

Consumer credit credit continues to contract steadily, ever since I called the peak in 2008:

This is part of what I meant when I called for a long lasting End of Consumerism:

The end of consumerism really means the end of capital consumption. It means that people realize that they need to save more and consume less, so as to provide for economic progress and more efficiency in the future, and to restore balance to the economy as a whole. It means that people have understood that too much of the existing capital stock has been consumed and has deteriorated.

This is the causality that the majority of pundits and economics professors that one can hear talk every evening on the news simply don’t understand. All their theories and policies are ignoring this one crucial fact: That Americans are done consuming for the foreseeable future. The end of consumerism isn’t just a temporary ditch. It is here and now and it won’t go a way for a long long time. It is a once in a lifetime occurrence. This is why it is so hard to grasp and to accept. But it is very simple to understand when one approaches it with sane common sense. How many more Starbucks branches do we need in the streets of New York? How many more gas guzzling cars should each family posess? Three, four, ten …? How many more different brands of detergents, shampoos, toothpastes, and consumer electronics products do we really need?

In particular have a look at the ride that securitized consumer loans have been taking since the beginning of the year!

Securitized consumer loans are more likely to be marked to market I think. This may be why we are getting a much clearer picture of the real extent to which credit is contracting here, but this is just speculation on my part.

After the mirage bump which was supposedly due to a regulatory adjustment of certain loans, total credit and loans continue to contract steadily:

Credit: