Zeev's Turnips Patch-No Politics (ZEEV)

[Zeev Hed]

Elroy, the point is that of M2 rate of growth is under the economy's rae of growth, the economy's rate of growth, with a lag, of course, will eventually decline the te money supply rate of growth. Since January, the M2 chart you show indicates growth of less than 2% (going negative in late Mach early April),a bad sign for future economic activity. The feds have been raising rates, not because of fear of inflation, IMTO, but as I have said many times before, to make sure they have ammunition (ability to lower rates) if economic conditions suddenly deteriorate.

In times when a sudden impact (like a terrorist major attack on the home land, or even a series of failures of big hedge funds)is always a possibility, the responsible thing to do is to make sure such ammo is on hand. At 1%, there was simply no room fo priming in case such an event occurred.