The Fed's consolidated balance sheet...and its data on reserves and the monetary base...reveal several interesting points, not limited to the following: The Fed's balance sheet expanded by some $294B (not M) over the last two weeks; that is, by approximately 1/3 (no misprint - 31.4%).

The big items on the asset side are repos (-$40B), "Other loans" (+$238B) and "Other assets" (+$86B); on the liability side, rev. repos (+$47B), deposits of depository institution (+$63B), and, the real kicker, UST deposits in its "supplementary financing account" an account that appears for the first time, as far as I know, certainly it hasn't been there in the last two years, to the best of my knowledge (+$160B). This boggles the mind.

As to the monetary base, total depository institution reserves more than doubled during the last two weeks from $47B to $110B, but the base, according to H.3 table 1, only increased by $7B. Seems to me that something is wrong with that, as the cash in circulation would have had to decline by some $56B, and yet it only went up by some $2B, according to H4 table 4.

At any rate, excess reserves went up by more than 3,000% from $2.2B to $69B. Moreover, the banks and S&Ls are carrying some $15B in "surplus vault cash" that is not included in excess reserves. Altogether, some $83B they could lend out if they had capital AND were not afraid of bank runs.

Bill

# posted by Bob Murphy @ 12:15 PM