Monetary Base Contracts 6.0% in January

In January 2016, the monetary base was $3.796 trillion. This was the second month in a row that the monetary base below $4 trillion. It had been above $4 trillion seven of the previous 11 months. Compared with one year ago, the monetary base contracted 6.0 percent. That was the largest month-ove-rmonth contraction since February 1938. And, only four times since 1950 has the monetary base contracted more than 2 percent. But, it has two months in a row and three times in the last six months. As a result, the annual growth in the monetary base decelerated to 0.1 percent, which was its slowest rate of annual growth since December 1950. December 1950 was also the last time the annual rate of change in the monetary base contracted. It will likely be necessary for the the rate of change in the monetary base to contract if the Fed wants to continue to raise interest rates. This is  uncharted territory for almost everyone alive and could cause all sorts of surprising reactions in the economy.

The U.S. dollar exchange rate is indicating that the money supply should grow at an accelerating rate in 2016. Currently, the dollar is growing at its fastest rate in history compared with the other major currencies of the world. 

You can see how the monetary base leads various machine tool sales and consumption data as well as primary plastics processing equipment at our monetary page.