Friday, October 24, 2008

The money supply 1975-2008: A question I could use help on

Money supply and economic performance

Greg Mankiw -- a Harvard economist and blogger -- has two very interesting data-images on the money supply here. Check them out.

My question deals with the data-image above, which shows the steady expansion of M1 since 1975. The question: why does the money supply remain constant or even drop during the Clinton years? More to the point: does this have anything to do with the excellent economic performance of the last half of the Clinton Administration? It is my understanding that the years 1996-1999 represent the only extended increase in median wages in the past three-four decades, and as the data-image shows, the only time in the same period in which the money supply was not expanded. Are these phenomena related?

Economists, can you answer these questions? Leave a comment, or email me at, letting me know if I can print your answers. Thank you. I really appreciate it.

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