FYI: Back on January 25, I penned a piece entitled “The Fed – Lucky or Smart? [1]”. In that commentary I argued that the Fed was managing the supply of total thin-air credit, i.e., the sum of commercial bank credit and depository institution reserves at the Fed, in a responsible manner such that growth in nominal economic activity would neither be too hot nor too cold. I noted that this Fed management of the supply of thin-air credit in mid January was more likely due to luck than to “smarts” on the part of our central bank. I also implicitly posed the question: What if the Fed’s luck should change for the worse without its “smarts” changing for better? Well, that question now is relevant. After rebounding to a rate approximately equal to its long-run median, growth in total thin-air credit sharply decelerated in February, both on a year-over-year basis as well as a three-month basis (see Chart 1).
Regards,
Ted
http://www.ritholtz.com/blog/2015/03/the-fed-drunken-coxswain-of-the-ss-america/print/
