Monday, September 5, 2011

MZM vs. Confidence

Click to enlarge.

I'm using a crude simplistic model as an attempt to understand the movements of our liquid money supply (MZM).

I assume that MZM grows naturally based on the rate of three month treasury bills and use the past 12 months of data to predict where we should currently be (assuming no inflows or outflows). I then compare where we are now to that prediction.

Using this model as a guide, investors lacked confidence over the past decade. Can't say I blame them.

I included some of the more major economic events on the chart. I've no doubt missed quite a few. For example, the Cuban Missile Crisis (1962) was certainly worth mentioning.

See Also:
Berlin Crisis (1961)
Oil Crisis (1973)
Sterling Crisis (1976)
Soviet War Scare (1983)
Israel Bank Stock Crisis (1983)
Black Monday (1987)
Black Wednesday (1992)
Euro Introduced (1999)
September 11 (2001)
Global Financial Crisis (2008)
Euro Crisis (2011)

Source Data:
St. Louis Fed: MZM
St. Louis Fed: 3-Month Treasury Bill


Troy said...

It's stunning to me that the mzm stock has damn near tripled since I came back to the US In 2000.

Then again, trade with China has quadrupled since then, so there's that.

Stagflationary Mark said...


Great point.

I think I'll do an MZM to retail sales ratio. That should be a hoot (and/or toot).