Are We Measuring The Wrong Money Supply... Again?

CHICAGO — U.S. Federal Reserve Chairman Ben Bernanke said on Friday that the shadow banking system still posed a threat to financial stability, and funding markets might still not be able to cope with a major default. In a wide-ranging speech explaining the Fed’s role in monitoring the health of the banking system, Bernanke also laid out how the central bank was looking at asset markets closely for signs of excessive risk taking.

Authored by Lee Quaintance and Paul Brodsky of QBAMCO, The Fed’s Exit The markets have begun to wonder whether the Fed (and other central banks) will ever be able to exit from its Quantitative Easing policy. We believe there is only one reasonable exit the Fed can take. Rather than sell its portfolio of bonds or allow them to mature naturally, we believe the Fed’s only practical exit will be to increase the size of all other balance sheets in relation to its own.

Article written by Prieur du Plessis, editor of the Investment Postcards from Cape Town blog.By Cees Bruggemans, Chief Economist of FNB.For the past two years we have been experiencing cyclical economic recovery and an upturn in inflation since late last year. By late last year this started creating market expectations of a less accommodative monetary policy and start of interest rate increases.

The flurry of interest this week around ways to tax Big Banks is important, because officials in the US are – for the first time – recognizing that reckless risk-taking in our banking system is dangerous and undesirable. But the possibility of a tax on bonuses or on “excess profits” that are large relative to the financial system should not distract us from the more fundamental issues.

Submitted by David Franklin and David Baker via Sprott Group,