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Strategies & Market Trends : Currencies and the Global Capital Markets

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To: Henry Volquardsen who wrote ()	11/23/1999 8:49:00 PM
From: Sam	Read Replies (1) of 3536

Wonder if anyone would like to comment on some comments that Bill Fleckenstein made in tonight's rap: More on aggregates... Also, there's been some question about the monetary aggregates I've been talking about. Folks need to understand that there are many different monetary aggregates and the most high-powered is generally considered to be the monetary base. I'm indebted to Michael Belkin for some of the following numbers: The three-month annualized growth rate of the monetary base is about 21 percent. That is the most rapid growth in the 47 years for which we have data. Currency in circulation is growing at a 24-percent, three-month annualized growth rate, and that's the most rapid since 1986, which is when the series started. That's probably more a function of Y2K currency hoarding than anything else. Fed Credit, the Fed's total balance sheet, is growing at a 26-percent rate and that's the most rapid growth of this decade - again at a three-month annualized rate. Yet, credit extended by the commercial banks is only growing at 5 percent. That tells you that all this money being jammed in is not going out into productive loans, and that's what's sloshing around out there in the financial markets. Some of the Ms don't quite show this, and there's a lag time between when the monetary base and Fed Credit start to grow and when the Ms grow. That's sort of the status of things, and what we're talking about when we discuss the massive liquidity that the Fed is injecting into the system. I don't want to get into a discussion of all the components that constitute the monetary data, so please don't send me emails asking about the details. If you want to get the data on this, go to the St. Louis Fed. It publishes the statistics and you can get your questions answered there rather than sending them to me.

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