[SIZE=+0]Inflation Watch[/SIZE]
[SIZE=-1]Last week was more of the same on the monetary inflation front, with another large increase in reserve bank credit and little change in broader measures of money supply such as TMS and M2.
Currently, the US Treasury has $621B on deposit at the Fed and the commercial banks have a combined total of $364B of excess reserves on deposit at the Fed. This means that there is now close to 1 trillion dollars of money at the Fed that should eventually work its way into the economy and into the broader measures of money supply. The big question is: how long will it take for this to happen?
We don't know, although we suspect that the current administration will want to allocate a large chunk of the Treasury's $621B over the coming two months, because after that it will no longer by the current administration and will lose the ability to control who gets what.
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