Money-Supply Growth Slows in February

by | Mar 31, 2019

Money-Supply Growth Slows in February

by | Mar 31, 2019

Money supply growth slowed in February, falling to the lowest rate recorded since February of last year. Overall, money-supply growth remains well below the growth rates experienced from 2009 to 2016, and has fluctuated little since March of last year

In February, year-over-year growth in the money supply was at 3.1 percent. That was down from January’s growth rate of 3.3 percent, but was up from February 2018’s rate of 3.0 percent.

The money-supply metric used here — the “true” or Rothbard-Salerno money supply measure (TMS) — is the metric developed by Murray Rothbard and Joseph Salerno, and is designed to provide a better measure of money supply fluctuations than M2. The Mises Institute now offers regular updates on this metric and its growth.

This measure of the money supply differs from M2 in that it includes treasury deposits at the Fed (and excludes short-time deposits, traveler’s checks, and retail money funds).

M2 growth fell in February, growing 4.2 percent, compared to January’s growth rate of 4.3 percent. M2 grew 4.1 percent in February of last year. Like the TMS measure, the M2 growth rate has fallen considerably since late 2016, but has varied little in recent months.

Money supply growth can often be a helpful measure of economic activity. During periods of economic boom, money supply tends to grow quickly as banks make more loans. Recessions, on the other hand, tend to be preceded by periods of falling money-supply growth.

Many factors contribute to these trends. In recent months, money supply growth — in both M2 and TMS — has likely been impacted by falling growth rates in real estate loans at commercial banks. In February, real estate loans grew 2.9 percent, year over year, which was a 51-month low. The demand for mortgage loans has softened as mortgage rates have risen. In February, the 30-year, fixed average mortgage rate reached 4.4 percent, which was down from November’s recent high of 4.87. February 2018’s average mortgage rate was much lower, however, coming in at 4.33 percent. However, the Fed has recently signaled it plans to half increases in the target rate, and this may lead to more real-estate loan activity.

Republished from mises.org.


Ryan McMaken (@ryanmcmaken) is a senior editor at the Mises Institute. Send him your article submissions for Mises Wire and The Austrian, but read article guidelines first. Ryan has degrees in economics and political science from the University of Colorado, and was the economist for the Colorado Division of Housing from 2009 to 2014. He is the author of Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.

About Ryan McMaken

Ryan McMaken is the editor of Mises Wire and The Austrian. Ryan has degrees in economics and political science from the University of Colorado, and was the economist for the Colorado Division of Housing from 2009 to 2014. He is the author of Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.

Our Books

thisone

Related Articles

Related

Trying to Build Peace One BRICS At a Time

Trying to Build Peace One BRICS At a Time

In the early days of the war in Ukraine, Ukrainian President Volodymyr Zelensky was open to negotiating a peace. The United States was not. State Department spokesman Ned Price explained, oddly, that the midst of a war is not the time for diplomacy. “This is not real...

read more
EXPOSED: Biggest FBI Spy Scandal of the Year

EXPOSED: Biggest FBI Spy Scandal of the Year

A Foreign Intelligence Surveillance Court opinion released last week revealed that the FBI violated the constitutional rights of 278,000 Americans in 2020 and 2021 with warrantless searches of their email and other electronic data. For each American that the FISA...

read more
Biden’s Ukraine Failure Rivals Iraq and Afghanistan

Biden’s Ukraine Failure Rivals Iraq and Afghanistan

When the smoke finally clears, President Biden’s Ukraine debacle will go down—along with Afghanistan and Iraq—as one of the greatest foreign policy disasters in U.S. history. Hundreds of thousands have been killed on both sides in the service of the U.S. neocons’ long...

read more

Pin It on Pinterest

Share This