Pretty obvious...Fed has no control over the money supply

To all those who say, "The Fed is printing money and it controls the money supply and it's debasing the currency and causing inflation" and whatever else...

Here is a chart of the monetary base against M2. As you can see, the base (which the Fed has direct control over) had zero correlation with M2.

Zero correlation.

Velocity of money at an all-time record low!

Velocity of M2 at an all-time record low. This is screaming...the government's got to spend, spend, spend!

John Carney — An outdated monetary policy model stirs fears of Fed policy

John Carney debunks the myths about reserves, money supply, bank lending, and inflation. Will will the people who need to hear it, like Rick Santelli and the Zero Hedgies, read it?

CNBC NetNet

An outdated monetary policy model stirs fears of Fed policy
John Carney | Senior Editor

Simon Wren-Lewis — The Liquidity Trap and Macro Textbooks

A standard objection to the money hypothesis is that nominal interest rates did (after a time) fall to their lower bound. The counterargument – which the textbook also suggests - is that, if the money supply had not contracted, long run neutrality would imply that eventually inflation would have to have been higher, and therefore real interest rates on average would be lower. So in one way the story about how higher inflation could avoid a slump is there.

What is missing is the link with inflation targeting. Because textbooks focus on the fiction of money supply targeting when giving their basic account of how monetary policy works, and then mention inflation targeting as a kind of add-on without relating it to the basic model, they fail to point out how a fixed inflation target cuts off this inflation expectations route to recovery. Quantitative Easing (QE) does not change this, because without higher inflation targets any increase in the money supply will not be allowed to be sustained enough to raise inflation. In this way inflation targeting institutionalises the failure of monetary policy that Friedman complained about in the 1930s. Where most of our textbooks fail is in making this clear.  

mainly macro

The Liquidity Trap and Macro Textbooks

Simon Wren-Lewis | Professor of Economics, Oxford University

Would someone tell these folks that the "M" in MV=PT is M1 and not MB. Inflation targeting is not a transmission mechanism from MB to M1 to spending. To target something implies the ability to hit the target. The cb has not means to do this other than in targeting its desired interest rate through monetary policy. Moreover, no one actually believes that a cb will just sit by as inflation increases in spite of its having promised to do so in announcing an inflation target.

Factory of Wealth

Interesting story at Archaeology (hat tip Roger) on recent uncovering of ancient Chinese ruins that look like a massive coin minting operation from 2,000 years ago.

Looks like they used the floor of the building as a giant mold system for casting coins.  And these historians are even on the right track in interpreting the effects of correctly operating this type of currency system:

"This mint," Liu says, "can help us tell the story of the booming Han economy."

Yes it can Dr. Liu!

Without the appropriate amount (billions) of these coins being made available for use in settlement and to satiate savings desires, the economy could not have "boomed".  And of course there is no evidence of the authorities"borrowing" them at all.

Nick Rowe — Wicksteed, stocks and flows

Hmmm. That's starting to sound like a transactions demand for money function. But if we have a demand to hold money for transactions purposes, we can still get an equilibrium in which money is held and valued even if T(t) is always zero.

(Wicksteed said (HT David Glasner) that fiat money has value because the government requires it for payment of taxes. I'm saying that's not sufficient. And it's not even necessary, in the sense that if my local recycler accepted fiat money, even at a negligible price, that would be enough to replace T(t)>0 in ruling out the equilibrium in which fiat money has a price of zero.)

Read it at Worthwhile Canadian Initiative
Wicksteed, stocks and flows
by Nick Rowe

Seems like Nick is saying that the money supply is set exogenously by government whereas the operational reality is that in a system in which the central bank is the lender of last resort the money base is determined by demand for reserves for settlement and reserve requirements based on credit creation. Moreover, the size of the money supply (M2) is set endogenously by credit extension that creates credit money.

There is no doubt that money is an idea rather than a thing, that is, a human social construct that underlies a primary social, economic and financial institution. The state theory of money does not deny this and admits that credit money predates state money historically. Anthropologists have also observed that credit money grew out of social relationships involving reciprocity and trust.

The Chartalist claim is that state money, that is, currency, gets value from the necessity of the private sector to settle its government-imposed obligations with government when government only accepts is own liabilities as credits. This allows government to shift private assets to public use through currency expenditures.