Friday, April 27, 2012

GDP Update

The GDP is still dragging as seen in the above based on latest release. There is slow growth in core numbers and only slow growth based on limited inflation which is controlled by the FED.
M2 is still increasing but slowly and thus limited risk of inflation if one looks at this classic measure. However:
The FED still has massive amounts of currency stored in banks who still are holding onto the cash making substantial spreads. With an all Democrat FOMC we do not expect a change for at least five years in this plan unless the current Chairman is replaced by a very strong and astute monetarist.
Current calculated inflation is still quite low and trending downward. This is monetary inflation as contrasted to real inflation at the consumer level which we estimate to be in excess of 10%. What drives this down is the housing collapse and the current Administrations pressure to allow stagnant foreclosable properties to become walking dead.

Non surprises in the above chart for inflation components.