M1

Money Supply as measured by M1 is a good tool to follow in determining the path of interest rates , Debt markets and also future Fed actions

If we are to believe that "inflation is always and everywhere a monetary phenomenon" , then we should look not only at interest rates but at the amount of Dollars in circulation . The most recent figures from the St. Louis Fed point to a steep decline of M1 , even an outright contraction in percentage terms .

Why should we care that the Fed needs to fight inflation ? That age old question and its answers and ensuing arguments usually point to the loss of buying power .... in other words , with inflation, " stuff " , gets more expensive. Too much money chases too few goods , so prices are forced upwards .

These charts are self-explanatory , slowing money supply points to slowing economic growth ( maybe even recession ) , slowing inflation pressures , further weakening of commodity prices , further strength in the Treasury market with debt yields falling , and possible Fed rate decreases in 2007