{"id":3013,"date":"2010-06-23T07:38:06","date_gmt":"2010-06-23T07:38:06","guid":{"rendered":"https:\/\/mmm.9dotdigital.ca\/?p=3013"},"modified":"2025-03-27T15:49:04","modified_gmt":"2025-03-27T15:49:04","slug":"monetary-base-and-markets-update","status":"publish","type":"post","link":"https:\/\/mmm.9dotdigital.ca\/?p=3013","title":{"rendered":"Monetary base and markets: update"},"content":{"rendered":"<p>The story so far:<\/p>\n<p>US and global equities have been following fluctuations in the US monetary base (i.e. currency plus bank reserves) over the last 18 months &ndash; see first chart. The most recent low in the base occurred in early May; the Dow Industrials index troughed five weeks later. The subsequent recovery in the base, however, stalled a month ago, suggesting that the rally in equities may be in the process of rolling over.<\/p>\n<p>More positively, the Eurozone monetary base on an expanded definition including one-week term deposits &ndash; likely to be regarded by banks as a close substitute for reserves &ndash; has continued to rise strongly in recent weeks. The environment is reminiscent of June \/ July last year: the US monetary base moved sideways but the Dow rallied following a surge in the Eurozone base.<\/p>\n<p>In contrast to then, however, the macroliquidity fundamentals are less favourable, with G7 real M1 growing more slowly than industrial output &ndash; see prior <a href=\"http:\/\/www.moneymovesmarkets.com\/journal\/2010\/5\/5\/global-money-sufficient-for-recovery-but-no-excess-for-marke.html\">post<\/a>. The stalling of the US monetary base in summer 2009, moreover, was clearly temporary given the Federal Reserve&rsquo;s quantitative easing plans.<\/p>\n<p>These various cross-currents may mean that equities continue to fluctuate in a trading range that frustrates both bulls and bears, an outcome also suggested by the &ldquo;six-bear comparison&rdquo; discussed in previous posts &ndash; second chart.<\/p>\n<p>A more positive outlook would be signalled by Fed action to boost US monetary base. The most likely form would be a suspension of the &ldquo;supplementary financing program&rdquo; under which the Fed has borrowed $200 billion from the Treasury &ndash; repayment of this sum would inject an equivalent amount into bank reserves.<\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" style=\"width: 680px;\" src=\"\/storage\/diusemb-230610.gif?__SQUARESPACE_CACHEVERSION=1277281346971\" alt=\"\" \/><\/span><\/span><\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" style=\"width: 680px;\" src=\"\/storage\/disjvprfb-230610.gif?__SQUARESPACE_CACHEVERSION=1277281373629\" alt=\"\" \/><\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The story so far: US and global equities have been following fluctuations in the US monetary base (i.e. currency plus bank reserves) over the last 18 months &ndash; see first chart. The most recent low in the base occurred in early May; the Dow Industrials index troughed five weeks later. The subsequent recovery in the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-3013","post","type-post","status-publish","format-standard","hentry","category-money-moves-markets"],"_links":{"self":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3013","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3013"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3013\/revisions"}],"predecessor-version":[{"id":5322,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3013\/revisions\/5322"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3013"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3013"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3013"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}