Thursday, August 30, 2012

Tight Money and Fast Growth...

I'm back, and harping on the same strain again.

Today I thought I'd run Nominal GDP percent change per year against the Fed funds rate, expecting to see a negative correlation (lower Ffr = higher NGDP growth). What I saw instead suprised me:

A near-perfect positive correlation. I guess this means we should be raising rates to spur recovery, right? But in all seriousness, it's major evidence that high rates = loose money and fast growth, tight money = low rates and slow growth. Now I've made charts demonstrating that will both M2 AND the Ffr.

Nobel please.

P.S. here's the same thing but percent change from a year ago for Ffr. Similiar picture, same point.

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