Wednesday, March 4, 2009

Monetary Base versus Money Supply

Craig Depken, a great guy and former colleague when I was in Arlington, TX, is worried. I was too the first time I saw the chart he posted:




















Then, I did some legwork and hopefully we can keep CADII from fleeing to Canada. The monetary base is heavily biased towards bank reserves, and if banks just are not lending, then this would be expected. Try the actual money supply on for size:














Or, try looking at non-borrowed reserves, and you might see why Bernanke went ooooohhh [expletive] around late 2008 (not the big spike into the negative):

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