Between the Lines: Money Supply May Be Out of Fashion but It Is Still a Key to Economic Future

Summary

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A FEW months ago, I opined in this column about the skyrocketing increase in Britain's money supply and the fact that no-one seemed to be taking any notice. M4 money supply grew 14.5 per cent in the year to September - a 16-year high. The last time this occurred was during Nigel Lawson's boom which was followed by the John Major slump.

Last Thursday, the Bank of England took notice and raised interest rates to 5 per cent. One reason cited by the monetary policy committee was a worry about that "rapid" monetary growth coinciding with "limited" spare production capacity across the economy, which is just the old definition of inflation I learned in Economics 101 - too much money chasing too few goods.

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Between the Lines: Money Supply May Be Out of Fashion but It Is Still a Key to Economic Future

So is 1980s's Monetarism due for a revival? Not according to Ben Bernanke, the chairman of the US Federal Reserve, who is still struggling to fill the boots of Alan Greenspan. Bernanke turned up at a conference of central bankers earlier this month to inform them that ...

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