Monetary Base Drops 12% from One Year Ago

(Negative) In October 2016, the monetary base was $3.587 trillion. This was the lowest level since September 2013. Compared with one year ago, the monetary base decreased 12.0 percent, which was the fastest month-over-month contraction since July 1937. This was the 10th time in 11 months and 14th time in the last 17 months that it has contracted. As a result, the annual rate of change in the monetary base, now -3.7 percent, contracted at an accelerating rate for the eighth month in a row. The last time the annual rate of change contracted faster was May 1938. This was during the second leg down of the Great Depression. So, perhaps this is an indication that we are entering the second, and hopefully final, leg down in the Great Recession. It is likely that this will cause some surprising shifts in economic data.