Thanks a lot for the specialist explanation. I did not know about Austrian school although expected that my view cannot be very original. The goal was to figure out whether it is possible for a non-professional to understand at least in some approximation what happens with markets now.

As for M2 and M3 data, this was my key point that FED decided to stop publishing M3 data recently and therefore one cannot know anymore how many dollars are in circulation in the world.

Certainly, the problem is of the global nature, but my impression is that US is to blame for the crisis since US FED essentially controls the amount of reserve currency in the world.

With best regards,
Dmitry.

One of the usual complaints layed down by say the Austrian school, and various monetarist factions is that the federal reserve kept interest rates too low for too long. This increases the money supply and can cause a bubble if the money supply grow faster than GDP (they are tracked by indicators like M2 and M3).

Unfortunately its not entirely robust either, b/c bubbles have been created in the past even when the money supply is relatively low growth.

So I’d be wary about one size fits all explanations, but yea certainly effects like this can increase the probabilities or add pressure for euphoria phases.

(Interestingly in this case, the problem is not locused just in the US, but is global in nature, which complicates things to the nth degree as you have to account for all the different regulatory laws, different interest rates, different inflation rates and so on and so forth.. In short an analytical nightmare)

Glad you are among my readers now.

Cheers,
Dmitry.

Allen Taylor