Australia and money supply growth

We need a better gauge on growth than GDP to truly understand where inflation (CPI) really is IMO. We all know CPI is a lie but how to calculate? If we had a harder gauge on growth than simple GDP we can simply subtract money supply growth from economic growth to get real inflation figures. Ie if 8.5% more cash is chasing 1.5% more goods and services then inflation should sit around 7%.

One thing no one has mentioned is why the US hasn't seen hyper inflation but the rest of the countries like China are. Large portions of the money supply growth are heading into banks holding massive losses in the US so the real broad money is really staying stable as the inverted pyramid affect of deflation in assets etc counters the inflation. But at the same time, Asian countries like China don't have the deflation problem yet but have to counter that money printing in order to keep thier exports cheap to fund the minimum growth (at least 7% growth in china or they are really going back wards.)

The merry go round stops when real steps in Asia are made to kurb inflation. What we have seen so far is nothing.
 
Lovey80 said:
One thing no one has mentioned is why the US hasn't seen hyper inflation but the rest of the countries like China are.
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No countries are currently experiencing hyperinflation. I think you meant high inflation.

Hyperinflation is a complete loss of confidence in a currency, and the accompanying inflation rate is a minimum of 50% per MONTH or per ANNUM, depending on your definition.

This is very different to high inflation.
 
Oops yeh thats what I meant sorry. But I did mean Hyperinflation with respect to America only. In any normal circumstance IMO it should have caused it but because the friends of the Fed are hoarding all the dollars that they received to cover bad debts it isn't filtering out into the economy.
 
"Over the month of December, M3 grew by 1.2 per cent and broad money grew by 1.0 per cent.

Over the year to December, broad money grew by 7.5 per cent. "
 
Over the month of January, M3 grew by 0.8 per cent and broad money grew by 0.9 per cent.
Over the year to January, broad money grew by 7.8 per cent.
 
asdfghjkl32 said:
Australia will definitely suffer in high-inflation in the coming years.
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That's a broad statement alphabet. In how many years will we experience high inflation? "In the coming years" suggest 3-5 years to me. I think it'll be 2-3.
 
7% compounded is a doubling in 10 years.

Consider that this inflation of the (funny) money supply has been happening for decades and you might realise we are already suffering high inflation. But like the proverbial frog not feeling the change in water temperature as it is slowly brought to the boil, neither do we feel this insidious stealing of our wealth.

It's here and now and everywhere. I laugh when I see those fast food adds with people holding burgers in their finger tips and the blocks of chocolate going from 5 pieces per row to 4, etc. while prices are rising.

Imagine how bad it will get when we already accept this current high inflation environment as normal and don't even acknowledge it as inflation.
 
7% PA overall growth is bad considering the interest you can earn on FIAT in a bank is between 4-6%. :/

Then factor in exponential growth which at 7% is double in 10 years as stated above. No wonder people are turning to commodities to protect them selves.
 
Could someone clarify what M3 includes in Australia? I think it's worth remembering that money supply is all forms of cash + debt. So the amount of currency in circulation could be rising while broader money supply is falling off a cliff due to contracting debt.
 
Trichter said:
Could someone clarify what M3 includes in Australia? I think it's worth remembering that money supply is all forms of cash + debt. So the amount of currency in circulation could be rising while broader money supply is falling off a cliff due to contracting debt.
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'M1' defined as currency plus bank current deposits from the private non-bank sector;
'M3' defined as M1 plus all other authorised deposit-taking institution (ADI) deposits from the private non-AFI sector, plus certificates of deposit issued by banks, less ADI deposits held with one another;
'Broad money' defined as M3 plus other short-term liquid AFI liabilities held by the private sector, except those held by other AFIs ;
'Money base' defined as holdings of banknotes and coins by the private sector plus deposits of banks with the Reserve Bank of Australia (RBA) and other RBA liabilities to the private non-bank sector.

Src: http://www.rba.gov.au/glossary/index.html
 
Over the month of February, M3 grew by 0.3 per cent and broad money grew by 0.3 per cent.
Over the year to February, broad money grew by 7.2 per cent.
 
Prior said:
7% PA overall growth is bad considering the interest you can earn on FIAT in a bank is between 4-6%. :/

Then factor in exponential growth which at 7% is double in 10 years as stated above. No wonder people are turning to commodities to protect them selves.
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Yeah I sometimes wonder why I have money in the bank earning 6%

It's like this imaginary interest that isn't really mine anyway because it's gobbled up by tax and inflation!
 
Gino said:
aleks said:
The old logarithmic scale in the shoe trick.....
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LOL - Would you believe the RBA is only growing the money supply by a consistent amount? Would you believe it? No?

Well, would you believe the money supply is growing at a consistent rate? Don't think so, huh?

How about a compounding and variable growth rate that reduces the value of the currency to zero over time, stealing the value of your savings by giving it to the people who get to use the newly printed money at full value before the dillution effects are realised?

http://dollardaze.org/blog/pages/00024/aud.png
Source: http://dollardaze.org

[youtube]http://www.youtube.com/watch?v=F-QA2rkpBSY[/youtube]
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This is why I will always keep at least 90% of all my "cash" in the form of bullion!
 
mmm....shiney! said:
asdfghjkl32 said:
Australia will definitely suffer in high-inflation in the coming years.
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That's a broad statement alphabet. In how many years will we experience high inflation? "In the coming years" suggest 3-5 years to me. I think it'll be 2-3.
Click to expand...

We already suffer high inflation. People are just too stupid to realise it and happily accept CPI (government designed croc of shit) as inflation, which it is not!
 
Over the month of March, M3 grew by 0.6 per cent and broad money grew by 0.3 per cent. Over the year to March, broad money grew by 7.1 per cent.
 
Comments from the RBA on May 1st:

"Recent data for inflation show that after a pick up in the first half of last year, underlying inflation has declined again, and was a little over 2 per cent over the latest four quarters. CPI inflation has also declined, from about 3 per cent to a little over 1 per cent at the latest reading, as the weather-driven rises in food prices in the first half of last year have, as expected, now been fully reversed. Over the coming one to two years, and abstracting from the effects of the carbon price, inflation will probably be lower than earlier expected, but still in the 23 per cent range."

So inflation will end up in the 2-3% range for the past 12 months, yet the money supply has been growing at 7+% for the past 12 months.
 
So if they didn't keep diluting the money supply, our savings would have appreciated in purchasing power by 5 to 6 % .
 
Over the month of April, M3 grew by 0.5 per cent and broad money grew by 0.2 per cent. Over the year to April, broad money grew by 6.7 per cent.
 
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