Intermezzo: The Fight Against Credit Contraction

Much has been said about the Federal Reserve’s balance sheet expansion, “money printing,” and commodity inflation.

The simple fact remains, however, that all of these billions of dollars haven’t even been able to replace the money destroyed by debt deflation. Even inflation-hawk John Williams’s reconstruction of this series shows that the peak growth in the discontinued wide-money growth occured in early 2008, and is still contracting y/y.


Courtesy of

Despite higher prices, there is less money in the system.  The money in the system (created by Federal Reserve balance sheet expansion) that replaces debt deflation is also far less economically active, as evidenced by velocity and multiplier measurements.

Evidence continues to mount: the inflationistas badly need to revisit their religious views on monetary policy theory.

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4 Responses to Intermezzo: The Fight Against Credit Contraction

  1. FMT says:

    Nice work on this, but I think it will take more than facts to have a hyper-inflationista change his mind. Many of them are rapidly shifting the goalposts and claiming food price inflation in other parts of the world as evidence of the correctness of their religiously-held views.

  2. duc says:

    Hi Matt,Could you provide the link to the St Louis M2 WRESCRT chart. I have been through the data base at the St Louis Fed, and cannot seem to locate it.Ta.jog onduc

  3. Matt Busigin says:

    duc,I’ve been thinking of attributing my FRED graphs with a link so you can directly tinker with the variables. Here is that link:,Matt

  4. duc says:

    Matt,I see, you’ve created your own series from two others. All is clear now. Thank’s for the link. It had me puzzled there. jog onduc

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