Week In Review
For now, I'll comment briefly on some important news this week.
-U.S. stock markets had their biggest weekly gain (+12%) since 1974, with Citigroup (+120%), Ford (+88%) and GM (+71%) leading the way after an already implemented bailout in the first case and a hoped for bailout in the two latter cases. Given the fact that bond yields at the same time fell significantly (with the 10-year note yield falling below 3% for the first time ever), this suggests really loose monetary conditions.
-The latest weekly money supply report did in fact report another increase in M2 and MZM, though not very dramatic ones. We could see more dramatic gains later.
-Sweden fell into a recession formally according to its statistics bureau. Meanwhile, money supply growth in Sweden fell to just 1.9%, the lowest since 2002. The fact that real money supply growth is now negative in Sweden is of course a key factor behind the recession.
-Meanwhile, euro area money supply growth by contrast rose dramatically in October, from 1.2% to 3.7%, owing mostly to a dramatic increase in currency in circulation. These numbers may have reversed in November, but if not then real money supply growth could again become positive in the euro area considering the dramatic estimated decline in price inflation.
-Amity Shlaes argues in a good way against the economic agenda of Paul Krugman and Barack Obama, as well as Krugman's interpretation of the 1930s, although the essay also contains a misleading assertion about the evils of deflation.
-Despite the weak economy in Germany, German politicians and central bankers remain less Keynesian than their colleagues in the U.S. and U.K. Germany faces significant problems mainly due to the unfavorable demograhic situation created by a too low birth rate, but by resisting Keynesian solutions they will avoid creating even more problems.