Showing posts with label money supply. Show all posts
Showing posts with label money supply. Show all posts

Wednesday, September 21, 2011

Money Money + Money -- Money supply update

The broadest money supply figures available (M2 + institutional money market funds) continues to trend higher.  


A note to all of you who are fearful of hyperinflation, this figure would be skyrocketing upwards instead of being in the ~+6% year over year range if we were entering a phase of very high inflation.  Yes, the narrower measures of money supply are growing but they aren't being transmitted to the rest of the economy (see Japan, deleveraging) as there is still a reluctance to borrow by the US consumer.  See my recent previous posts on mortgage rates and  total mortgage loans outstanding for examples of how the Fed's pumping money into the financial system is not being transmitted into higher lending (and thus higher prices)

Tuesday, April 26, 2011

Money Money + Money -- Money supply update

The broadest money supply figures available (M2 + institutional money market funds) turned positive a few months ago but is only growing slowly.  Furthermore this money measure has not exceeded its pre crisis peaks.

Looking back in the mid 2000's you can see broad money supply was also very sluggish. With QE 2 ending in June we'll see if this data series can keep expanding.

Monday, October 18, 2010

Money Money + Money -- Money supply update

The broadest measure of money supply still reported by the Federal Reserve continues falling albeit at a decelerating pace.

While the pace of decline is moderating, broad money (M2 + Institutional Money Market Funds) continues dropping. I wonder if QE 2.0 will put a floor in the decline?

As you can see money supply growth is negative, something not seen during this entire data series.  As a growing money supply implies a growing (real) economy this does not bode well.

Wednesday, August 18, 2010

Money Money Supply -- Money supply update.

A money supply update.  The data presented includes both the M2 money supply and the only remnant of M3 still published by the Federal Reserve which is Institutional Money Market Funds. Together this is the 'broadest' measure of money supply published by the Federal Reserve.

As you can see money supply continues contracting which has not happened for the entire data series starting back in 1974.  The previous slowdowns around 1994 and 2005 did show declining growth rates but this absolute decline on a year over year basis is unique.  

The Fed needs to take some lessons on how to make money:

Tuesday, August 10, 2010

A word about the change in Fed policy today

Today the Federal Reserve altered their policy regarding principal payments on their Mortgage Backed Security holdings.

From the press release:
To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve's holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities. The Committee will continue to roll over the Federal Reserve's holdings of Treasury securities as they mature.
The stock market immediately moved upwards from the news, reducing the losses for the day.  The ten year treasury bond shot upwards in value.

A few comments regarding the change in policy:

Before the announcement the Fed intended allowing MBS principal paydowns to slowly reduce the Fed's balance sheet over time which would have reduced the quantity of narrow money in the economy.  With this news the the Fed's balance sheet will remain the same size (for now) but the composition will change from GSE backed assets to Treasury bonds and bills.

If the Fed had allowed the MBS paydowns to shrink their balance sheet the narrow and broader money supplies would have shrunk as well.  As you can see from this chart the M2 gauge of money supply has been very sluggish of late and shrinking the Fed balance sheet at this time would have slowed M2 growth even further.

This measure is not stimulative, no more money is going to be injected into the system.

If the economy was on the mend why did the Fed alter their strategy of slowly removing this stimulus?

Monday, June 21, 2010

Another short term money market indicator

I recently posted about the TED spread and how it had been marching higher (Murphy's law struck of course and it promptly reversed course right after I mentioned it.)

Zerohedge recently posted about a similiar money market stress indicator in the Chinese banking sector that bears watching.  If you want to look at the 1 month Chinese interbank lending rate in there future, here's the direct Bloomberg link

Friday, June 4, 2010

Keynesians start to discover the power of excessive debt

Just a little clip from one of my favorite sci fi movies The Fifth Element.  Replace the unknown evil sphere with excessive debt.




Greece, Hungary, California, New York, etc.  I wonder who is next to realize what happens when you borrow too much money.  China perhaps?

Thursday, May 27, 2010

Money Money + Money -- Money supply update

Money supply figures supplied by the Federal Reserve (as of 2010-05-27) continue to decline.  The data shown is the sum of M2 and Institutional Money Market Funds (the only subset of M3 still reported)  As you can see money supply tends to drop during / after recessions and recovers as economic activity increases.  We are in uncharted territory as this data set has not shown negative growth for the entire data series.

Considering the growth rate is decidedly negative and shows no inclination of slowing down this is worrisome for future economic growth. 

Wednesday, April 21, 2010

Money Money + Money --> Money supply update


Money supply figures continue their decline on an abolute and/or relative basis depending upon how you measure it.  M2 + Institutional Money Market Funds (the only series left from M3) continues declining on a year over year basis, M2 on its own continues to decelerate.  Once the MBS purchases by the Fed finally settle I think the first derivative will continue to decline on both series.

Tuesday, March 16, 2010

Money Money + Money -- Money Supply

I'd like to thank Annaly's blog for introducing this bit of data to me. The Fed stopped producing the M3 money supply series several years ago and while there are some common attempts to recreate the data series I prefer to publish data I can get my hands on and cite.  Shadowstats.com produces the most well known M3 series.  As you can see M3 growth has recently fallen onto the negative side of the ledger.




Annaly recently wrote about M2 + Institutional Money Market Funds which I have reproduced here.  Over time I'll include some additional data in the graph so you can see the long term relationship between money supply growth and inflation. Right now the important point is money supply growth is negative on a year over year basis, something that has not happened over the entire data series. 

This is another example of the decline in lending, money supply, et al, occuring in America.  What do you think will happen as all the government stimulus starts to unwind?