Note that there was a slight dip a few weeks ago and since then it has been rising again. The rate of increase is not as great as before as we shall show but the M2 growth should be a concern as we also see the unemployment rate growth slowing. We suspect this may be a slowing of the recession and a flow of cash back into the economy.
Now for the rate of growth of M2. This is shown below. The rate does show a strong positive annualized growth rate and this of course should be an inflationary concern. The rate of growth has begun to increase again as we noted above. This may be a result of the loosing of credit which we suspect is happening at a modest level.
Now for the Fed's Balance Sheet. We show this below. The Fed's BS continues to grow at a fast rate annualized both on the spot basis and on the 12 week running average. This means that the Fed is still actively stimulating the market as we has anticipated.
We believe that these three charts will provide a slight warning of inflationary pressure as we enter 2010 but with the current recession we will not see it in 2009. The major concern is that the stimulus money is very slowly trickling in and its impact, frankly if any, will not be seen until Q4 2009. Then in 2010 it may provide a double whammy to inflation with the current actions of the Fed.
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