M1 still rising, cash hoarding inconsistent with a market or economic top.

My update of monetary aggregates shows money is still flowing into insured checking accounts at an elevated rate.  M1 has grown by 18.7% in the last 12 months.  The average 12 month growth rate since 1970 is 5.4%!  Consider M1 as the raw material for bank loans and consumer spending.  High M1 growth is consistent with economic recovery periods coming out of troughs.  Low or negative M1 growth is consistent with economic tops.  We have now seen 16 consecutive months of double digit percentage LTM M1 growth – the longest period since the economic recovery of the early 90’s where there was 24 months of double digit growth.  M1 is ~15% of nominal GDP.  In a full recovery and nearing a cyclical top it would be 10% or less.  M1 is the lubricant for the economy that can be multiplied in the form of bank loans once confidence recovers – which is showing signs of improvement.   Jeb Terry, Sr. May 6, 2012

Aberdeen Investment Management – a guide service for micro-cap technology investment

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