Sunday, November 9, 2008

Weekly update on Monetary Base and Reserves

Monetary Base

Monetary Base (y-o-y % change)

Reserve balances at the Fed

Note that reserve balances at Federal Reserve banks is now about $500 billion. The average over the past 20 years has been about $19 billion. The Government has already put most of the money in the system that will be used to buy the securities it sells. DO NOT LISTEN TO PEOPLE WHO SAY, "The Government will have to raise the moeny in order to fund the bailouts." The money is already in the banking system and most of those resereve balances--that pay very little interest--will be happily swapped for the securities the Treasury will sell.

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