Still No Panic
While I’m in the mood to update some graphs, here’s the other one I like. The explosion in the monetary base is still entirely explained by the black hole on the banks’ balance sheets. That blue line (the difference between the monetary base and bank reserves) still appears to be following the trend. In other words, any money created by the Fed exists only for the purpose of pretending our banks are solvent.
On the plus side, this graph means that we’re still not on the verge of hyperinflation due to an exploding money supply. On the negative side, until the game of pretend ends, this is going to act as a huge drag on the economy at large.
(source: St. Louis Fed: FRED Graph)
