ECB's strict monetarists probably disagree, arguing that the faster rate of money-supply growth signals higher inflation ahead.
In America the annualised rate of broad-money growth over the past six months has been just 0.2%.
If not, and those banks decide to instead sit on those reserves, or at least the greater part of them, we will likely see a precipitous fall in the rate of growth in the money supply, maybe even an actual contraction.
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Most central bankers view monetary policy as influencing the rate of growth of the money supply to achieve their objectives.
My point here is that open market purchases and the associated expansion of money growth rate are accepted as normal or routine Fed policy so long as interest rates have some room to decline in the process.
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In the 1980s we thought the best way to do that was by targeting the growth rate of money, but they could never find a measure of the money supply that had a reliable relationship with inflation.
Some people focus on the expansion of bank credit, some focus on what happens to interest rates, and some focus on the growth rate of the money supply.
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And with a dollarized monetary regime, the M3 measure of broad money would soar from its current anemic annual growth rate of about 6% to between 20% and 30%.
Theory and practice both tell us that printing money cannot generate economic growth or lower the natural rate of unemployment, but it can cause inflation.
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That used up the traditional interest-rate channel of monetary policy, but not the more direct channel of money supply growth.
Euro TMS, which represents our preferred Austrian inspired money supply aggregate, posted a year-over-year rate of growth of 6.3% in December.
TMS2, which represents our broadest and preferred US money supply aggregate, posted a year-over-year rate of growth of 9.6% in January.
TMS2, which represents our broadest and preferred US money supply aggregate, posted a year-over-year rate of growth of 10.1% in January.
In many cases of past rebalancing, an undervalued exchange rate also led to excessive growth in money supply, making it harder to tame inflation.
Euro TMS, which represents our preferred Austrian inspired money supply aggregate, posted a year-over-year rate of growth of 6.3% in January, down slightly from the recent high of 6.5% seen in November 2012.
That decision was a response to a U.S. unemployment rate stuck at 9.6 percent, a recent slowdown in already weak GDP growth, a decline in total employment in three of the past four months, a low and declining inflation rate, weak money growth, and fiscal policy off the table over deficit concerns.
Covered money substitutes grew at an annualized rate of near 360% in March taking the three-month rate of growth to an annualized 214% and the twelve-month growth rate to 21.1%.
The federal funds rate is considered by most as the single instrument of monetary policy, now that everyone seems to have forgotten about money growth as a more important instrument and measure.
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