Yearly money supply growth reaches 5%, highest since 2008 crash

Many seems to believe the economy is about to crash soon, but according to this data a new lending boom is just about to begin. In reality this coming money bubble can become much larger than earlier ones thanks to all the excess reserves banks hold, this suggest that we are nowhere near a new major crash, although corrections are always possible.

Fed recently updated it’s graph showing the money supply growth i.e the total amount of credit creation by private banks. The yearly growth has reached the highest level since the 2008 crash, about 5% and seem to be rising quite fast. If the five percent level is breached a new normal money bubble is about to begin.

Banks create new money to finance it’s lending, they do this by expanding their balance sheets = leverage. The new money is allocated mainly for speculation which leads to a unsustainable bubble that must be followed by a credit crunch:

http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=Dsx

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