Federal Reserve Watch: Some Rough Times Ahead


  • Concern has been raised about the year-over-year decline in the M2 money stock.
  • This decline needs to be considered along with the decline in the velocity of circulation of the M2 money stock which has, so far, offset the decline, itself.
  • The Federal Reserve may have to deal with more money “sloshing around” the banking system than it originally thought when it began to “tighten up.”
  • Otherwise, the Fed seems to be on target with reducing the size of its securities portfolio and seems to be managing its interest rate increases well.
  • There is still a lot going on in the economy and in the financial markets that may lead to a lot of problems to be faced by the Fed in the near future.

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