Will Consumers Continue To Spend?
The US money supply, or money that is
readily available for consumption and spending, continues to make new
highs, which could translate into further consumption of goods and services.
Specifically, Money with Zero Maturity (MZM)–which includes
all physical money, checking accounts and NOW accounts, savings deposits, and
money-market funds–currently stands at $6.3 trillion. Savings deposits, which
make up half of MZM, increased by $10 billion last week and now total $3.04
trillion. This trend is especially meaningful for the US economy when one
considers that this growth in liquidity is occurring against a backdrop of
improving consumer sentiment, as this increases the likelihood that a
significant portion of this money will be used to purchase goods and services.
Moreover, when one compares the current level of MZM to the
equity market capitalization–using the Wilshire 5000–the equity market is nowhere near previous bubble levels, such as in 2000.
