Mish Shedlock has done a lot of work on the nature of "Money...

Mish Shedlock has done a lot of work on the nature of "Money Supply"

His work is easily accessible and researched through his web site: http://globaleconomicanalysis.blogspot.com/

His thoughful and well researched definition: M' - MPRIME - makes a lot of sense to me and I have posted his excellent graph with some underlying commentry that is available at: http://globaleconomicanalysis.blogspot.com/2007/01/money-supply-and-recessions.html

"On a CPI adjusted basis we see that there has been a recession on 6 of 7 sustained dips below the zero line of year over year growth in M'. The 1985 excursion below 0% was extremely brief in stark contrast to all of the labeled recessions and thus can be discounted. 1995 is still a miss but nowhere near as pronounced as compared to M' unadjusted. 1995 also happens to correspond to the start of a huge ramp-up in sweeps. Perhaps that is significant and perhaps not. Nonetheless, M' CPI adjusted gives a cleaner signal, arguably calling for 7 recessions of which 6 happened.

The above chart clearly shows M' CPI adjusted to be a strong leading economic indicator".