American Reality Check

pmbug

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2/25/21 - $7.638T (32B increase from week before)
3/4/21 - $7.606T (32B decrease from week before)
3/11/21 - $7.628T (22B increase from week before)
3/18/21 - $7.742T (114B increase from week before)
3/25/21 - $7.768T (26B increase from week before)
 

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So remember back in February (post #358) when Powell said money printing doesn't lead to inflation? Turns out that Powell's testimony to Congress coincided with the Fed deciding to change the frequency of reporting on the M1 and M2 money supply.

The Federal Reserve recently discontinued updating the M1 and M2 weekly money supply series and is instead updating the series monthly.

Steve Hanke, professor of Applied Economics of Johns Hopkins University, said that this change reflects a change in attitude from the world's largest central bank on the importance of looking at money supply.

"Chairman Powell has very explicitly claimed that money doesn't matter in recent testimony. He's basically said that money and the measurement of money doesn't really matter because it's unrelated to inflation," Hanke said.

These money supply series have been published since the 1970s, and the fact that the Fed has changed the publishing frequency on M1 and M2 money supply from weekly to monthly demonstrates a change in worldviews, Hanke said.

"In principle, they don't think [this data] is important. They want to deep-six the monetarists, basically and push them off to the sidelines. They want to bury Milton Friedman once and for all and be done with it, and their preference would probably to not report any monetary statistics," he said.

The St. Louis Fed has this disclaimer on the M1 supply page:
...
Starting on February 23, 2021, the H.6 statistical release is now published at a monthly frequency and contains only monthly average data needed to construct the monetary aggregates. Weekly average, non-seasonally adjusted data will continue to be made available, while weekly average, seasonally adjusted data will no longer be provided. ...
 

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4/1/21 - $7.737T (31B decrease from week before)
4/8/21 - $7.757T (20B increase from week before)
4/15/21 - $7.842T (85B increase from week before)
4/22/21 - $7.870T (28B increase from week before)
4/29/21 - $7.829T (41B decrease from week before)

Fed balance sheet still creeping up.
 

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Back on page 12 of this thread, posts circa September 2019 tracked the Fed's overnight repo market indicating stress in the banking system. ZH reporting that the issue (or something similar) appears to be brewing (again):

... the biggest news of the day may not be the crash in cryptos or even the Fed Minutes, but what the Fed published at 1:15pm ET when it revealed that in the latest overnight repo, 43 counterparties parked reserves worth $294 billion with the Fed, a number which not only surpassed the March 2020 covid crisis highs, but was the highest since 2017!

As Pozsar noted on Monday, "use of the facility has never been this high outside of quarter-end turns, and the fact that the use of the facility is this high on a sunny day mid-quarter means that banks dont have the balance sheet to warehouse any more reserves at current spread levels."
...
 

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5/6/21 - $7.859T (30B increase from week before)
5/13/21 - $7.879T (20B increase from week before)
 

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The Fed announced late Wednesday that it will unwind one of the most iconic bailout facilities of the Pandemic era, namely its holdings of corporate bonds, junk bonds, bond ETFs, and junk bond ETFs that it had purchased last year. The Fed said it will outright sell them.
...
The facility, set up in a Special Purpose Vehicle (SPV) that the Fed calls Secondary Market Corporate Credit Facility (SMCCF), was iconic not because of its size, which was endlessly hyped in the media at the time as a $750-billion bond-buying giant though it never got close; but because of its previously forbidden nature.
...
As small as this facility may be – $13.8 billion being small only by the Fed’s standards of money-printing and bailing out – unwinding these holdings is nevertheless another baby step toward removing support from the market.

It never should have happened in the first place. Precedence set now.

5/20/21 - $7.972T (93B increase from week before)
5/13/21 - $7.952T (20B decrease from week before)

9/25/2020:
...
If the Fed averages $30B a week increase, the balance sheet should hit $8T in about 29 weeks - just over half a year.
It's 3 months past the date of speculation in my quote above. Almost there.
 
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