Money Supply Watch - Sep. 22 2008

As of September 22, the money supply has shot up sharply from $1.87 trillion to $1.94 trillion. The annual growth rate has exceeded 4%. As I expected in my last post regarding the money supply data from September 15th, the federal government's bailout of Fannie Mae, Freddie Mac, and AIG has significantly added to the stock of money available.

The injection of money by the Federal Reserve Bank has significantly exceeded the contraction caused by ongoing mortgage foreclosures and rising credit card defaults. The modified, now $800+ billion bailout bill that will most likely pass the US House of Representatives tomorrow will also add considerably to the money supply. We will keep monitoring it closely.

The true money supply gives us indications about future development of asset and consumer prices and booms and recessions.