In addition to shrinkage in commercial paper outstanding over the past few weeks, we are also beginning to see sustained declines in money market fund holdings and money supply. It’s too early to say if the drop in reported money supply is a trend. I think the money supply numbers are out of touch with reality anyway. They would be much lower if they took into account how much of the total reported “money” was backed by worthless assets. If reality begins to bite at some point, crisis conditions could quickly return.
While most Fed alphabet soup programs continued to decline this week, one program that assists money market funds took a big jump, hinting at renewed pressure somewhere in the system. It could just be a one week blip, but it’s another data point to keep an eye on. Another run on the money market funds could be difficult to stop. Click here to download complete report in pdf format (Professional Edition Subscribers). Try the Professional Edition risk free for thirty days. If, within that time, you don’t find the information useful, I will give you a full refund. It’s that simple. Click here for more information.