Another week. Another new high in the composite liquidity indicator. Stock prices tagged along, just as they have throughout the 5 years of Fed money printing madness. The liquidity trend remains strongly upward, in spite of Tapers One and Too, which now have the combined effect of reducing the flow of cash into Primary Dealer accounts by $20 billion per month. Taper III will begin taking another $10 billion off starting now.
That may sound like a lot, but the dealers will still be getting around $70 billion a month from the Fed’s POMO purchases. Add to that the cash flowing into dealer accounts from the BoJ, and the rumblings that China is relenting on its tighter monetary policy, and that’s still a garishly tilted playing field.
Something needs to happen to force the central banks to stop the madness. I don’t know what that will be, and it seems pointless to speculate about it. A dangerous trend will develop that should begin to make it clear that the Fed will need to reverse course. History tells us that the Fed will be behind the curve. By the time they recognize the problem, it will be too late. The Fed will have committed the next in its series of long term serial blunders, and the markets will spin out of control. We’re not there, but we’re getting close, as stock prices bubble off into the stratosphere.
Table of Contents
Macroliquidity Component Indicators
Fed Cash to Primary Dealers
Foreign central bank purchases
US commercial bank deposit flows
Bank Treasury purchases
Bank Trading Accounts
Bank reserve deposits
Commodities
Treasury Auctions, Federal Revenues and Supply Impact, and Treasury Yields
Open Market Operations (OMO) and Monetary Policy Actions
Primary Dealers
Other Policy Tools and Total Fed Credit
Other Fed Balance Sheet Items – Liabilities
Bank Loans Outstanding
Foreign Central Bank Treasury Holdings
Fed, ECB, and BoJ Balance Sheets, Vs. US Stocks and Bonds
The Dollar
Commercial Paper
Fannie and Freddie
Money Supply and Fund Flows
Bank Holdings of Treasuries
Bank Capital Trend
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