what is Money Supply?

I've been reading Marc Fleury's blog about how he's investing his JBoss millions, and well, trying to learn as he goes along...not that I have my own millions to invest or anything, but I have started to wonder what the hell is really going on with the current global economic picture a.k.a the credit crisis.

Well, first of, I've had to learn a thing or two about a lot of the terms Marc throws around, like M4, M1, etc. What is this M# thing? It's simply a reporting mechanism to measure just how much "money" (and the term is really used loosely by governments) is available in the "system" at any given point in time. To read and learn more on this, head on over to Wikipedia for a great article as usual.

Next, head on over to this article which describe what the US Federal Reserve did in 2006 when it stopped reporting on the M3 numbers. Why did they do it? The author has his theories of course, and they sound pretty bang on to my uneducated ears. A followup article picks up the story once more and the implications are not good. Depression, really?

Up till now i've only been skimming the financial news, as what most affects my daily life are things like the price of oil, and the US exchange rate. But as you start to dig a little deeper into things, it would seem to me that the economic outlook is pretty dire. I even began asking a friend of mine who was a former head economist at a major bank what he thought about what was going on. His reply was scary: "expect to see a lot of dead by the side of the road before this is all said and done". He means banks, investment houses, and even economic systems... the worst is yet to come basically is what i'm reading from the tea leaves.

In Canada things don't seem to be quite as dire as in the US right now. We have several things going for us:

• much tighter credit lending policies. Canada has never been a big fan of giving out consumer credit unless you could *really* prove you were worthy of it. We don't have many people with huge mortgages (there are some surely) but not as many as in the US.
• Oil. We're floating in it. The reserves in the Alberta tar sand fields are massive, and with the high price of oil these days Canada is reaping the rewards in jobs, direct money to provincial and federal coffers, etc. We also have large off-shore oil projects in NFLD. Check out the oil reserves table here.
• No housing collapse. We just have not seen the house price drops seen in other places, not yet anyways.

There are signs that events occurring in the USA and elsewhere are starting to impact things here in Canada. Isolated economies don't exist anymore, so what happens in China, USA, or elsewhere, ultimately ends up causing an effect where you live. I'm sure there are hard times ahead even for Canada regardless of how good things "seem" to be now.