Monetary Base Drops 2.1% in December

In December 2015, the monetary base was $3.869 trillion. This is the first time the monetary base has been below $4 trillion since July 2015 and the lowest it has been since February 2015. Compared with one year ago, the monetary base contracted 2.1 percent. Only three times since 1950 has the monetary base contracted more than 2 percent. But, it has happened twice in the last five months (the one other instance was December 2000). As a result, the annual growth in the monetary base decelerated to 1.2 percent, which was its slowest rate of annual growth since May 1961. The last time the annual rate of change contracted was December 1950. It may 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 somewhat uncharted territory 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.