I suggested in a post earlier this month that a quicker decline in the Reserve Base than the Monetary Base would indicate money leaving the reserves held at the FED. For an explanation why check this post.
The Adjusted Monetary Base (AMB) peaked in the first half of 2015 at $US4,165 billion and fell to a post-recession low of $US3,418 billion at the beginning of 2017. That was a decline of 17.9%. However, as the uncertainty around the election and a slowing of the economy in the 3rd and 4th quarter of 2016 the AMB reversed and climbed to $US3,929 billion – a rise of 14.9% and almost right back to the peak level. Since early this year the AMB has decreased to $US3,785 billion, which is a decline of 3.7% from the high seen earlier this year and up 10.7% on the year.
The Adjusted Reserve Base (ARB) peaked earlier than the AMB as the economy strengthened in 2014. The ARB peaked at $U2,924 billion and fell to a low of $US1,975 billion in early January, a total decline of 32.5%. From peak to trough the Reserves fell further and faster the Base. This indicated the economy was strengthening. However, as the economy slowed in 3rd and 4th quarter of 2016 the AMR rose to $US2,478 billion, up 24.5%. As the economy slowed the Reserves rose faster than the Base as lending was curtailed. As the stock market has gone higher and economic data improved, although only slightly, the AMR has fallen 6.1%, to $US2,326, which is more than the AMB has fallen and suggests the economy is accelerating again. For the year the AMR is up 17.7%, also more than the AMB has risen YTD.
It will be considered a good sign if the Adjusted Reserve Base continues to decline faster than the Adjusted Monetary Base and I will revisit this on the blog in the future.
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