Thursday, November 17, 2011
Reader "unknown" noticed that M2 jumped by almost $50 billion this week, and suggested that might be a sign that money was once again fleeing Eurozone banks for the safety of U.S. banks. However, as this chart shows, the latest jump is merely a reversal of an earlier decline. On average over the past 13 weeks, M2 is growing at a 6.3% annualized pace, which is right in line with its 15-year trend. There was a noticeable "bulge" in M2 which began around the time the Eurozone crisis started heating up last summer, but it hasn't gotten any bigger since mid-August. Meanwhile, a similar bulge in M1 is also reverting to trend growth, and dollar currency is only rising at a 5% annualized pace; big increases in currency growth tend to coincide with global panics in which the dollar becomes the safe haven of choice.
In short, there's not much going on with M2 of late, which suggests that although the Eurozone sovereign debt crisis has been intensifying, it is not resulting in a wholesale run on the Eurozone banking system.
Posted by Scott Grannis at 5:57 PM