Monetary Base Increases for Second Month

In November 2015, the monetary base was $4.029 trillion. While this total was down from last month, it was the fourth month in a row that the monetary base has been above $4 trillion. Compared with one year ago, the monetary base in November increase by 4.6 percent, which was the fastest rate of increase since January. Also, this was the second month in a row that monetary base increased month-over-month. This came after four straight months of contraction. As a result, the annual rate of growth in the monetary base accelerated for the first time since May 2014. The last time the annual rate of change contracted was December 1950. 

Compared with one year ago, the change in the real 10-year Treasury rate has been rising since the beginning of 2015. Typically, this indicates that the monetary base will grow at a sustained accelerating rate of growth. But, the Federal Reserve's has stated its desire is to raise rates, which would remove money from the economy and lower the monetary base. This is counter to what past history shows the Fed has done.

The U.S. dollar exchange rate also 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. Again, the Federal Reserve's current goal of raising rates would go counter to past history because higher interest rates should lead to a stronger dollar.

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.