I am an old money supply guy. I was trained with a monetarist and watched the number closely in the 80's. Over last to decades, money was not an interesting story. It is still not an interesting story for most. Yes, there is a focus on the Fed balance sheet but not on the aggregates yet they are telling us something.
M2 has been declining at some of the fastest rates in 30 years. Some accommodation by the Fed. Retail money funds and small time deposits are shrinking at a fast rate. Savings deposits have increased but money is flowing from the liability side of the bank balance sheet. Banks do not seem to care or they would be raising rates. This suggests that there has not been a lot of lending on the asset side of the balance sheet.
The behavior of the monetary aggregates was not expected and require going back to basics to find out what are the links between money, lending and economic activity.
M2 has been declining at some of the fastest rates in 30 years. Some accommodation by the Fed. Retail money funds and small time deposits are shrinking at a fast rate. Savings deposits have increased but money is flowing from the liability side of the bank balance sheet. Banks do not seem to care or they would be raising rates. This suggests that there has not been a lot of lending on the asset side of the balance sheet.
The behavior of the monetary aggregates was not expected and require going back to basics to find out what are the links between money, lending and economic activity.
No comments:
Post a Comment