where we go from here. I think interest rates need to rise
I certainly would like to see rates rising in conditions that naturally support that result. Unfortunately, I do NOT see those conditions coming for at least several years.
We are seeing M2 rise dramatically in the most recent data. Here it is:
But the rise is odd in that it is not coming from bank lending - which is going nowhere. It is largely coming from savings* and perhaps foreign fund flows (guessing). IF the M2 was a function of increasing bank lending and associated spending then it would be stimulative and pro-inflationary. But coming as it appears from saving it will not have that effect. I have been watching bank PR's and banks are seeing deposits growing more rapidly than they are lending. One bank that I watch closely saw deposits rising at a 7.5% annual rate while loans ran off at the same rate. The banks that are keeping lending up are largely doing so by making commercial loans while the retail loans run off. Anecdotal reports from bankers that I know is that the competition for good commercial loans is fierce.
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