This is a most interesting post and will take me some time to digest the figures.
The chart shown in the post does not correlate with the charts at St. Louis Fed. Reserve for loans (which may be optimistically toned down by misclassification). Their charts show debt levels of businesses slowing and not going “vertical:”
http://research.stlouisfed.org/publications/usfd/page17.pdf
However, this one is scary:
http://research.stlouisfed.org/publications/usfd/page16.pdf
It shows Fed’s holding of Treasury collateral vs. Term Auction Credit. Maybe this post explains this last page of money confusion.
Are Fed loans “money” supply if they’re never to be paid back (realistically)... or are they “assets” that will sit on the books forever. Maybe someone can enlighten me.
Unfortunately, like the Fed, the chart above starts the origin way above zero. So it’s hard to tell if there are significant trends. If we can answer the question of “what is a loan by the Fed’s current definition” then we can see more clearly what the true money supply growth has been. Right now it is quite conservative over the last few months:
http://research.stlouisfed.org/publications/usfd/page6.pdf
Just got my print edition with those graphs today, haven’t read through it yet.
The author of the graph had access to Total Credit Market Debt numbers from inside the Fed.
As you mentioned, the number he is using might not be what the St Louis Fed is publishing.
And I can’t answer the question with anything more than another question, how are level 3 market debt being reported to , then classified and disseminated inside the Fed Reserve’s economist groups?
Can’t answer that.
Well, if you get a handle on when these Fed “loans” will be called back in... please give the rest of us a heads-up.
Because that’s a question a lot of people have.
I would NB that Bernanke (and Paulson) have called for the TAF (et al) programs to be made permanent:
“Based on our initial experience, it appears that the TAF may have overcome the two drawbacks of the discount window, in that there appears to have been little if any stigma associated with participation in the auction, and—because the Fed was able to set the amounts to be auctioned in advance—the open market desk faced minimal uncertainty about the effects of the operation on bank reserves. The TAF may thus become a useful permanent addition to the Fed’s toolbox.3 TAF auctions will continue as long as necessary to address elevated pressures in short-term funding markets, and we will continue to work closely and cooperatively with other central banks to address market strains that could hamper the achievement of our broader economic objectives.”
From:
http://www.federalreserve.gov/newsevents/speech/bernanke20080110a.htm
Notice that they want public comment. Yea, right, like any of our concerns would be addressed or even acknowledged.