Reversal of trend?

Publié le par Jean-Pierre Chevallier

Reversal of trend?


Americans increased their savings to $ 47.4 billion in the week ending January 28, which is significant because an increase of this magnitude occurred only once previously in history: in the week after September 11, 2001 with $ 51 billion,
Chart 1:
20080208US0M2M100-copie-1.gif

 (Click here to enlarge the graph)

$ 47.4 billion had not been spent, as less sales therefore as less growth.

The increase in M2-M1 was 7.7% from one year to another,

Chart 2:
2008.02.08.US.1.M2M1.gif
(Click here to enlarge the graph)

The increase in the free money supply was only 7% during the previous weeks, which corresponded to a GDP growth at its optimum potential 3.5% because real GDP growth is inversely proportional to the variation in the free money supply,

Chart 3:
2008.02.08.US.2.FRM.gif

(Click here to enlarge the graph)

The trend of the increase in M2-M1 at the beginning of January was good, but the new trend is worrying because the increase in M2-M1… decreases much more slowly, which means that GDP growth is less that the high figures of the previous weeks.

The drop of the stocks because of massive sales by Société Générale on Monday, January 21 (which was a public holiday in the United States, therefore with little opportunity to control by American authorities) explained this behavior change of Americans.
The French financial community led by its mistakes a situation that could have serious consequences in the United States and elsewhere in the world if this new trend prevails over the previous one.
Frenchies are dangerous!

For the moment, it is not possible to know what is the trend that will prevail during the coming weeks either, Americans continue to consume as at the beginning of January, which will maintain growth, or they will continue to save, thus slowing growth.

The increase in M2 was around 5%, which was reassuring, now it rises to 6%, which is worrying,

Chart 4:
2008.02.08.US.3.M2.gif

(Click here to enlarge the graph)

In these circumstances, it is not surprising that Americans are wary Europeans and French in particular. They have consistently refused to enter into the capital of American banks while sovereign Arabs and Asians funds were admitted…
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