Important updates to MA compilation

In January 2012 we made some important updates to our measure of the money supply (MA). These were primarily an attempt to simplify the compilation and ensure that the series we were using were compatible across various reporting institutions. Whilst the previous measure used various asset classes from the Bank of England's Divisia tables as the starting point, the new measure is simply defined as:

MA = Currency + Demand deposits

MA is really a measure of the money stock, as opposed to the money supply, and the chart below shows the total amount for as far back as the Bank of England data goes (Janaury 2010).

The chart below shows the difference between the growth rates in the 2011 measure of MA and the 2012 measure. This is obviously a major difference since the new compilation method is now pointing to a steadily increasing rate of monetary expansion, as opposed to a continued monetary contraction. We will continue to look into these issues and provide updates.


November 2011 shows MA in continued decline

Our MA calculation for November 2011 dropped by 4.8% YoY, a significant decrease though not as steep as the previous month when it fell by 6.7% YoY.

Notes and Coins increased by 6.7% in November compared to the year before while M4 fell by 2.8%, slightly less than October 2011 when it fell by 2.9%.


Dec 2011 quarterly report released


Kaleidic Economics has published our second quarterly report, this time on the topic of nominal GDP targeting. You can download it here (.pdf)


Kaleidic Economics publishes new indicator on private investment

In last week's City AM I published an article comparing private and government investment:

When private sector investment declines, then the reasons need to be identified and a solution found. The key policy question needs to be “why aren’t businesses investing?” Attempting to offset it with government spending is just an accounting deception. And too much government intervention can be the underlying cause, not the cure – through high tax rates, burdensome regulations and policy uncertainty.

The data I used came from the "Gross Fixed Capital Formation" of the National Accounts (Table F). There are four components:

  • business investment (NPEL)
  • general government (DLWF)
  • public corporations (KLQ9)
  • private sector dwellings (KLQ5)

In compiling the chart I added business investment and private sector dwellings to create "private investment", and used general government as "government investment". I excluded public corporations. The chart below shows the results, and this will be updated in the data section of our website.


October 2011 MA falls abruptly

In October 2011 our MA measure fell by 6.6% compared to the year before as the turmoil in the financial markets from the Euro crisis accelerated. This decrease is more accentuated than the 3.8% fall we calculated for September 2011. 

The Notes and Coins figure released by the Bank of England for October 2011 increased by 6.2% compared to the year before while M4 for the same period decreased by 2.9%.