Money Supply in Freefall, Part Deux

M3 growth is now -5% y/y, the lowest since records began in 1960. The magnitude of that fall is huge and probably the real reason for the dollar strength; it is no wonder the dollar swap lines are having to be issued. In Europe, Germany’s chancellor Angela Merkel was adamant that the ECB would not increase money supply to buy state bonds as part of the emergency package to stabilise pressures within the euro. “Additional money supply will not be created to buy government bonds, rather money supply will be kept within limits existing today”.  European M3 growth was last reported in March down 0.2% y/y. Chinese M2 money supply growth was reported up 21.5% y/y. Whilst this is clearly a strong figure, it is the lowest level for a year. Looking at a simple average of the 3 combined, money supply growth has slowed from about 12% last September to just 5% now; the hoped for private sector loan growth has not yet materialised.