🚀 go-pugleaf

In article <1993Jan25.201022.18348@Princeton.EDU> nfs@volkl (Norbert Schlenker) writes:

>In December 1992, M1 had grown 15% over the previous 12 months (same
>source).  The actual increase was $125 billion and it was ALL currency.
>Federal Reserve Notes.  All of it.  Currency outstanding increased by
>50% in one year.

>Now I'm puzzled, because I simply do not understand what people are
>doing with all this currency.  Did we ship it all to Colombia?  Does
>half the country have a couple of thousand dollars stuffed (literally)
>under the mattress?  Are people that scared?  (I am, but I certainly
>don't get that impression from others while walking around.)

>Norbert
>nfs@cs.princeton.edu

   I've been curious about this also.  I'd have to go back and check the
figures, but as I recall, the increase is not all in currency; both
currency and demand deposits had increases of about 10-15% in the past
year.  Meanwhile, savings deposits had a much smaller increase (1% ?),
and M3 is at best staying constant (and perhaps actually dropping right
now).

   To a certain extent, people may be moving money from money market
funds to FDIC-insured institutions, since the money market funds no longer
offer higher interest rates.  But this provides no explanation for the
large increase in actual cash, which is especially strange if there really
is a downturn in the total money supply.

   So does anybody have any explanations for this?  And what are the
possible consequences?  (Is this a prelude to deflation?)
--
Mitchell Spector
E-mail: spector@seattleu.edu