Thursday, October 27, 2011

GDP Issues: 3Q 2011

The GDP has grown at an annualized rate of 2.5% in Q3 as of the current estimates from the BEA. The above is the real and the chained data, chained being effectively adjusted for inflation. The good news is that the chained has returned to where it was before the collapse.

The above is M2 and its annualized change. M2 has been growing with a large increase in Q2 and early Q3. Now it has again flattened. That most likely indicates slowing of the potential for inflation.

The Monetary Base has stopped its growth since the FED has stopped its policy of dumping cash into banks.

Inflation and its components generated from M2, Velocity and Y or GDP change are shown above. Calculated inflation is about 2-3%.

Thus we see some growth, we see little inflation pressure, and yet we see a stalled economy. As I have indicated before the major source of hesitancy is from the current Administration and its punitive policies.