Monday, March 9, 2009

Walk on the Fed?

Alex Tabarrok of MarginalRevolution notes that safe's are a counter-cyclical asset. Last week I heard a radio advertisement that, in part, went: "whether you need a gun safe for your home or a vault for your business..." Alex includes a graph of the currency component of the money supply. I've included the same here using a slightly different dataset. FWIW, currency has gone from $760B at the beginning of the recession to about $840B. That's about a 10.5% increase in currency, so I think it's more a bank "walk" than a bank run.

How did this happen? I suspect there are a lot of people who have decided to get another $10 back at the grocery store when they pay with a debit card. Others are getting another $20 each time they visit an ATM.

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