Re: borodog\'s mistaken understanding of M3...don\'t listen to his drivel
I like econ but this thread makes me want to bang my head in to the wall. It appears to me that Barron and Borro are both very well versed in economics so I would like to ask a couple of simple questions.
Money Supply as measured by M2 has grown rapidly but CPI figures have not, some have speculated that the excess liquidity has bid up real estate and stocks resulting in asset inflation rather than price inflation as measured by the CPI. How do you feel about that explanation?
Repos are a source of financing and add liquidity to the system, it would therefore seem that M3 levels are meaningful. I think I remember in Greenspan's book he talked about the FED being in the repo market but I am not 100% certain. What are the consequences of the rapid growth in M3? Inflation? Not meaningful?
Finally, do both of you feel that CPI numbers will eventually go up dramatically based on the rapid growth of M2 and / or M3?
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