14 October 2014
The graph of Corrected Money Supply (M1 non-seasonally adjusted plus Sweeps minus Personal Savings) below shows that monetary growth has levelled off after rising for nearly five straight years. The figures are from January 2001 to August 2014; the lag of two months is because of the lag in savings data.
This graph uses the savings figures revised by the BEA in July 2013. It also assumes that sweeps have remained constant since May 2012 when the Fed discontinued publication of sweeps data.
On October 29 the Fed is expected to announce that it will end its bond-buying programme or QE.
The last monetary contraction which started around January 2006 first had its effect on housing starts, then on housing prices, then on bank fortunes, eventually leading to a crisis in the payments system, and finally decimating all asset markets.