By John Galt
July 31, 2011
Tonight old Ambrose Evans-Pritchard hits a home run.
A definite must read.
Click on the title to read the entire editorial from the UK Telegraph:
We have a glimmer of hope. The key indicators of the US money supply are at last firing on all cylinders, a dramatic turn for the better that would normally signal recovery or even a mini-boom within the next six to 12 months.
Needless to say, these are not normal times. The US and EU debt crises are feeding on each other in a dangerous synergy, with fears of a fiscal “sudden stop” in Washington causing global risk aversion and aggravating tremors in the Spanish and Italian bond markets. It is a pre-taste of the “catastrophe” predicted by the Fed’s Ben Bernanke if politicians fail to control their passions.
And yet, data from the St Louis Fed show that America’s M2 money supply grew at a 6.4pc annual rate in the second quarter, accelerating to 12.2pc in June. The compound annual rate of change has exceeded 40pc over recent weeks.
The broader M3 indicator (including large savings deposits) is growing at the optimal rate of around 5pc. It has been an uncannily accurate lead indicator at each twist and turn of our economic drama over the past five years, and is telling us now that the Fed’s kindling wood has at last begun to ignite the damp coals of the US financial system. There is no longer a 1930s liquidity trap. We can infer that the housing market may be nearing the end of its deep slump.
The economy is curing itself in time-honoured fashion. Whether this monetary cure will be allowed to run its course depends on politicians in Washington, Berlin, Rome and Madrid.