Money matters. That’s why I have kept my eye on Greece’s money supply (M3). It’s been contracting in an increasing rate since February 2010. Since March 2010, I have concluded that the writing was on the wall and that all the debt sustainability numbers calculated by the International Monetary Fund, the European Union and the Greek government could be thrown in their respective bureaucratic trash cans. Well, even though the Bank of Greece is still behind the curve, it’s catching up. The Bank has just revised its forecast of Greece’s 2012 growth — down from -4.5% to -5.0%. The current annual rate of contraction (-19%) of the Greek money supply guarantees many more eruptions from that Balkan nation.
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