Wed 11:11 pm +01:00, 8 Nov 2023
posted by Tapestry
Money supply rose by 3.8% annually prior to pandemic.
A warning light on the economy’s dashboard is flashing red.
It is not sluggish GDP growth that is glaring most vividly, nor the modest rise in unemployment.
Instead, a small band of economists fear that a slump in the money supply is the clearest sign yet of the economy facing a serious recession. To them, it signals that inflation will be crushed so completely that Britain instead risks falling into a deflationary trap.
Broad money supply, the figure watched by these economists, measures the amount of cash that households and businesses have on hand to spend immediately.
It includes coins and banknotes, funds in current accounts and instant access savers, and other financial instruments that are effectively as good as cash when it comes to businesses keeping large sums on hand to spend at a moment’s notice.
In the jargon of Bank of England datasets, it is known as M4ex.
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