Why There's No Money In Monetary Policy

Macroblog directs us to Mark Hulbert on why money stock measures are no longer closely watched. For the amount of variation in money stock growth seen in the U.S. today, shifts in money growth have effects on prices and incomes that are swamped by those of other factors:

macroblog: Why There's No Money In Monetary Policy : Here's a pretty good explanation, from Mark Hulbert at MarketWatch:

Money may indeed make the world go 'round, as many on Wall Street are fond of saying. But even among advisers who think that it does, there is little agreement on whether the supply of money is growing or contracting, much less what such trends might mean for the stock market. This was brought home to me over the past week as I read different investment newsletter editors' reactions to the money supply data that the Federal Reserve periodically releases. One veteran newsletter editor, for example, wrote this past week that "the Fed is creating liquidity at a pace that I don't think I've ever seen before." Yet another prominent newsletter editor, reviewing the same data, concluded that the Fed's growth of the money supply has been "stingy" over the past year.

How can there be such a wide disagreement? Part of the reason is that there are so many different definitions of money. And for each of the major definitions, furthermore, the Fed reports the data on both an unadjusted as well as a seasonally adjusted basis. Add to that the volatility of the data, and you have a situation in which you can find data to support almost any preordained conclusion....

I have been unable to find any statistically meaningful correlation between the growth rate of the money supply and the stock market's subsequent performance.... [Madeline Schnapp, Director of Macroeconomic Research at TrimTabs Investment Research] told me that she and her fellow researchers at TrimTabs have explored the econometric relationships between the money supply data and the stock market "every which way from Sunday" -- and that they have found no straightforward correlation...