This is a syndicated repost published with the permission of Sober Look. To view original, click here. Opinions herein are not those of the Wall Street Examiner or Lee Adler. Reposting does not imply endorsement. The information presented is for educational or entertainment purposes and is not individual investment advice.
Cash holdings are an increasingly large component of US commercial banks’ balance sheets. This demonstrates the fact that thus far the Fed’s monetary expansion is not producing the “optimal” result. Banks are not growing the non-cash portion of their balance sheets fast enough to offset these rising reserves. A more optimal policy would be able to take that into account.
In fact the latest data shows that the non-cash component is declining.
 |
| Source: FRB (click to enlarge) |
For those who are interested, the Fed recently published a technical paper (here) indicating that a massive QE program in the face of a “large and persistent adverse demand shock” is suboptimal. The data on credit expansion (above) seem to support that argument.
From our sponsor:
Join the conversation and have a little fun at Capitalstool.com. If you are a new visitor to the Stool, please register and join in! To post your observations and charts, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam filter.
