Fed changes money; New CFS Divisia Monetary and Financial Measures

On February 23, 2021, the Federal Reserve Board implemented major changes to “streamline” the H.6 statistical releases.  The depth and timeliness of available monetary data diminished significantly.  For instance:

– The publication frequency of the release will change from weekly to monthly.
– Institutional money market funds will be discontinued this year.
– The release will contain only monthly average data – weekly average, seasonally adjusted data will no longer be provided.
– Monetary aggregates will no longer provide a breakdown of components by banks and thrifts.

A series of papers commenting more deeply on these changes as well as implications for financial markets and the economy will be forthcoming.

We apologize for any inconvenience related to the delayed distribution of CFS monetary and financial measures.  A recalibrated and fortified Advances in Monetary and Financial Measurement (AMFM) data set and release is available below.

A hearty thanks to Jeff van den Noort, Ryan Mattson, Liting Su, and especially Professor William A. Barnett – CFS Director of AMFM.

We look forward to any comments you might have.

Today we release CFS monetary and financial measures for February and January 2021.  CFS Divisia M4, which is the broadest and most important measure of money, grew by 28.1% in February 2021 on a year-over-year basis versus 28.5% in January.

For Monetary and Financial Data Release Report:

March 2021 data will be released on May 03, 2021 at 9:00 AM ET.

Bloomberg terminal users can access our monetary and financial statistics by any of the four options:

3) ECST <GO> –> ‘Monetary Sector’ –> ‘Money Supply’ –> Change Source in top right to ‘Center for Financial Stability’
4) ECST S US MONEY SUPPLY <GO> –> From source list on left, select ‘Center for Financial Stability’

CRS Reviews Role of “Payment for Order Flow” in Debate over “Zero Commissions”

The Congressional Research Service (“CRS”) reviewed the role that “payment for order flow” (“PFOF”) plays in the “surge in retail investor securities trading at major discount broker-dealers.”

In its report, CRS described PFOF as a controversial rebate subsidizing the “non-existent commissions.” CRS stated that when broker-dealers do not pass the PFOF rebates onto clients, the economic incentives to send retail orders to rebating market-makers create potential conflicts of interest. CRS noted that this argument is why the United Kingdom has “effectively banned” PFOF.

Advocates for PFOF argue that investors benefit from the subsidized low or zero commission rates. Critics argue that PFOF raises conflicts-of-interest concerns over a brokers’ duty of best execution.


While payment for order flow is a legitimate area for discussion, the more significant issue is why customers don’t use full-service brokers that provide them with some level of guidance. Congress and the SEC should consider whether over-regulation and the threat of enforcement actions are killing the business of full-service brokerage, leaving retail customers essentially on their own.

Unfortunately, asking the question as to whether regulation may be excessive or have unintended consequences is not a current priority. Rather, the tendency in response to any unusual event is to seek to adopt more regulations, as if more rules are always the panacea. Whether or not payment for order flow survives, the more significant reality is that retail investors are now effectively pushed to obtain their investment advice not from a regulated institution, but from a subreddit. See generally GameStop: Regulators Should Focus Less on “Solving the Problem”; More on “Improving the Situation.”

Charles Goodhart: lifetime achievement award

Congratulations to Professor Charles Goodhart for earning Central Banking’s lifetime achievement award.  Central Banking chronicles many of Charles’ monetary policy and financial stability achievements and work on:

– Monetary frameworks,
– Risk management,
– Hong Kong peg,
– Independence of RBNZ,
– FX research,
– “The Great Demographic Reversal: Ageing Societies, Waning Inequality, and an Inflation Revival” with Manoj Pradhan and
– Goodhart’s law.

CFS is grateful to Charles for serving as a senior distinguished Advisory Board member since inception, engaging in roundtable discussions, as well as actively guiding CFS Bretton Woods working conferences over the years.

To view the full article:

A Monetary History of China, free online

I recently found out that the English translation of Peng Xinwei’s monumental work A Monetary History of China is now available free online. The work covers Chinese monetary history from ancient times through the end of the monarchy in 1911. Peng Xinwei was a scholar turned banker who was one of the victims of Mao Zedong’s Cultural Revolution. The Chinese version of the book is from 1965. Edward Kaplan translated the book into English, an impressive feat of scholarship in its own right, and had it published in two volumes in 1994. I wrote a review of the book here.

There have of course been other notable books on Chinese monetary history since. Those that have caught my attention include Richard von Glahn’s Fountain of Fortune: Money and Monetary Policy in China, 1000-1700 and Jin Xu’s recently translated Empire of Silver: A New Monetary History of China. I have not seen a good history of the last century-plus of the Chinese monetary system, though there are books on subperiods and topics. For mainland Chinese scholars, the topic is fraught with difficulty, because under the first few decades of Communist rule, the monetary system was among the institutions that hindered China from experiencing the rapid and widespread economic growth enjoyed by Hong Kong, Singapore, and Taiwan.

Rhodes on Debt for Vaccines program

CFS Chairman of the Advisory Board William R. Rhodes and World Health Organization epidemiologist Cristina Valencia offer an intriguing idea to help ameliorate the COVID-19 pandemic in Latin America… debt for vaccine swaps.

Bill pioneered the use of debt for equity swaps throughout the Emerging world, as head of many advisory committees of international banks. The present idea builds on debt for nature swaps – integrating pharmaceutical companies.

We look forward to any comments you might have.

To view the full article:

Post BREXIT Risk Conference / Call for Papers

An important United Kingdom economics conference “Post BREXIT: Uncertainty, Risk Measurement and COVID-19 Challenges” is being held online on June 22-23.  Call for Papers information is below.

CFS Director of Advances in Monetary and Financial Measurement (AMFM) Professor William A. Barnett will be delivering a keynote lecture “Is the BREXIT Bifurcation Causing Chaos in the United Kingdom?”

Other keynotes include:

David Aikman: Professor of Finance and Director of the Qatar Centre for Global Banking and Finance, King’s Business School, King’s College.
Patrick Minford: Professor of Applied Macroeconomics at Cardiff University.
Professor Jagjit Chadha: Director of the National Institute of Economic and Social Research (NIESR).
Professor Costas Milas: Professor of Finance at the Management School, University of Liverpool.

The Call for Papers at the U. of Birmingham is at:

If you would like to submit a paper, the Call for Papers contains a link to another online page providing more details about the conference and instructions about deadlines and how to submit.  The conference will produce special issues of two journals (Economic Modeling, and European Journal of Finance).

The conference is open to the public with no registration fee.  The Call for Papers contains a link to the registration page.

Harvard Law School Forum publishes CFS analysis of Robinhood and GameStop

The Harvard Law School Forum on Corporate Governance published CFS analysis of Robinhood and GameStop.

Events surrounding GameStop and Robinhood signal future issues that financial market participants are destined to confront and regulators are eager to confront.

Steven Lofchie, Robin L. Lumsdaine, John D. Feldmann, Diane Glossman, Jack Malvey, Yubo Wang, and I,

1) examine essential issues as well as
2) propose next steps.

As these are complex and multipronged issues, we look forward to any comments you might have.

To view the full article:

The Future of Risk Management

CFS special counselor David X Martin and David R. Koenig, founder of the Directors and Chief Risk Officers group (DCRO) opine on “The Future of Risk Management.”  Risk management and crisis prevention are longstanding core objectives and activities at CFS.

David and David offer perspective on how boards and organizations can foster a positive embrace of risk taking. Topics include:

– Translating the new risks
– Resiliency planning
– Risk any unanticipated impact of efficiency
– Forward facing techniques
– Professionalizing risk management
– The future of risk governance at the board level

To view the full article:

Bubbles, Quantities and Short Sales podcast

My friend and former Salomon Brothers colleague, Larry Bernstein hosts an engaging “What Happens Next?” weekly podcast.

We spoke about bubbles, monetary quantities and short sales – covering:

– future implications for financial markets… why it’s a bubble and
– public policy, regulatory risks, and what to do.

To listen to the podcast:

To view the remarks:

FRED Publishes 100+ Years of CFS/Johns Hopkins Data on the Fed’s Balance Sheet

The Federal Reserve Bank of St. Louis FRED database, the premier source for free U.S. financial data, now includes data of the Federal Reserve System’s weekly balance sheet back to the Fed’s beginning in 1914. The data come from a paper and data set I compiled with five students of CFS Special Counselor Steve Hanke.

The students — Cecilia Bao, Andrew Chen, Nicholas Fries, Justin Gibson, and Emma Paine — were undergraduates who have all since graduated from Johns Hopkins University. As part of their work for Hanke’s course Research in Applied Economics, they wrote papers dividing the Fed’s history into three periods, with each paper using the corresponding data. I served as an adviser and outside reader. We then combined the data into one big data set.

Previously, some monthly balance sheet data from the Fed’s early years were digitized, along with full data from recent years. Full weekly data from the beginning, integrated with recent data, were however unavailable in any readily usable form. The students put in many hours digitizing the data, a task that any of thousands of professional economists could have done over the last 30 or even 50 years but none were enterprising enough to do.

Here is the announcement from FRED about the data set and here are the data series. For the original papers, see Chen and Gibson, Bao and Paine, Fries, and our joint paper. For the data from the joint paper, see here.