CFS Monetary Measures for June 2022

Today we release CFS monetary and financial measures for June 2022. CFS Divisia M4, which is the broadest and most important measure of money, grew by 1.8% in June 2022 on a year-over-year basis versus 2.1% in May.

For Monetary and Financial Data Release Report:
https://centerforfinancialstability.org/amfm/Divisia_Jun22.pdf

For more information about the CFS Divisia indices and the data in Excel:
https://centerforfinancialstability.org/amfm_data.php

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

1) ALLX DIVM
2) ECST T DIVMM4IY
3) ECST –> ‘Monetary Sector’ –> ‘Money Supply’ –> Change Source in top right to ‘Center for Financial Stability’
4) ECST S US MONEY SUPPLY –> From source list on left, select ‘Center for Financial Stability’

FT: Bair on Volcker and the Fed

Today, the Financial Times published Sheila Bair’s Opinion piece “The Fed must emulate the tactics of Volcker’s fight against inflation.” Sheila notes that:

  • US Federal Reserve chair Jay Powell has expressed deep admiration for the legendary Paul Volcker, yet Powell is deviating from Volcker’s methods.
  • Volcker fought inflation by restraining growth in money supply to keep monetary policy tight through two recessions to finally beat inflation.
  • For many years, the Fed has unwisely paid little attention to the huge volume of money its accommodative polices have created. It now needs to follow Volcker’s example and attack excess money supply head-on.

We look forward to any comments you might have.

To view the full article:
https://www.ft.com/content/b82082c9-d26a-47a5-8b1a-34121f572645

Sheila Bair is a former chair of the US Federal Deposit Insurance Corporation and a senior fellow and Advisory Board member at the Center for Financial Stability.

CFS Monetary Measures for May 2022

Today we release CFS monetary and financial measures for May 2022. CFS Divisia M4, which is the broadest and most important measure of money, grew by 2.3% in May 2022 on a year-over-year basis versus 3.4% in April.

For Monetary and Financial Data Release Report:
https://centerforfinancialstability.org/amfm/Divisia_May22.pdf

For more information about the CFS Divisia indices and the data in Excel:
https://centerforfinancialstability.org/amfm_data.php

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

1) ALLX DIVM
2) ECST T DIVMM4IY
3) ECST –> ‘Monetary Sector’ –> ‘Money Supply’ –> Change Source in top right to ‘Center for Financial Stability’
4) ECST S US MONEY SUPPLY –> From source list on left, select ‘Center for Financial Stability’

CFS Monetary Measures for April 2022

Today we release CFS monetary and financial measures for April 2022. CFS Divisia M4, which is the broadest and most important measure of money, grew by 3.4% in April 2022 on a year-over-year basis versus 4.6% in March.

For Monetary and Financial Data Release Report:
https://centerforfinancialstability.org/amfm/Divisia_Apr22.pdf

For more information about the CFS Divisia indices and the data in Excel:
https://centerforfinancialstability.org/amfm_data.php

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

1) ALLX DIVM
2) ECST T DIVMM4IY
3) ECST –> ‘Monetary Sector’ –> ‘Money Supply’ –> Change Source in top right to ‘Center for Financial Stability’
4) ECST S US MONEY SUPPLY –> From source list on left, select ‘Center for Financial Stability’

Barnett on “Why were the Fed’s inflation forecasts so wrong?”

Professor William A. Barnett – CFS director of Advances in Financial and Monetary Measurement (AMFM) – questions “Why were the Fed’s inflation forecasts so wrong?”

He then addresses limitations in the modeling approach at the Federal Reserve and – more importantly – offers ideas for the future.

To view Bill’s opinion piece…
https://www.kansascity.com/opinion/readers-opinion/guest-commentary/article260903877.html

CFS Monetary Measures for March 2022

Today we release CFS monetary and financial measures for March 2022. CFS Divisia M4, which is the broadest and most important measure of money, grew by 4.6% in March 2022 on a year-over-year basis versus 4.9% in February.

For Monetary and Financial Data Release Report:
https://centerforfinancialstability.org/amfm/Divisia_Mar22.pdf

For more information about the CFS Divisia indices and the data in Excel:
https://centerforfinancialstability.org/amfm_data.php

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

1) ALLX DIVM
2) ECST T DIVMM4IY
3) ECST –> ‘Monetary Sector’ –> ‘Money Supply’ –> Change Source in top right to ‘Center for Financial Stability’
4) ECST S US MONEY SUPPLY –> From source list on left, select ‘Center for Financial Stability’

CFS Monetary Measures for February 2022

Today we release CFS monetary and financial measures for February 2022. CFS Divisia M4, which is the broadest and most important measure of money, grew by 5.0% in February 2022 on a year-over-year basis versus 5.1% in January.

For Monetary and Financial Data Release Report:
https://centerforfinancialstability.org/amfm/Divisia_Feb22.pdf

For more information about the CFS Divisia indices and the data in Excel:
https://centerforfinancialstability.org/amfm_data.php

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

1) ALLX DIVM
2) ECST T DIVMM4IY
3) ECST –> ‘Monetary Sector’ –> ‘Money Supply’ –> Change Source in top right to ‘Center for Financial Stability’
4) ECST S US MONEY SUPPLY –> From source list on left, select ‘Center for Financial Stability’

Senate Banking Committee Considers Implications of Digital Assets for Illicit Finance

The Senate Committee on Banking, Housing, and Urban Affairs considered the implications of digital assets for illicit finance, terrorism, and other forms of criminal activity.

Statements

Senator Sherrod Brown, Chair of the Senate Banking Committee, emphasized crypto’s role as a tool used by criminals to facilitate ransomware attacks and finance terrorism. Senator Brown contrasted crypto with the dollar, stating that the latter “has safeguards to protect against crime and illicit activity” because companies that use real money are required to “know their customers, and report suspicious transactions.” Senator Brown argued that (i) “[c]rypto allows money launderers and terrorists to do things they never could have done with dollars,” and (ii) in the absence of the safeguards around dollars, “lax rules and little oversight” are giving criminals more opportunities to “hide and move money in the dark.”

Senator Brown also said that President Biden’s recent executive order on digital assets will “jumpstart a coordinated strategy from law enforcement and regulators to fight bad actors who want to use crypto.” He added that without such regulatory and law enforcement action “cybercriminals, rogue regimes [and] terrorists . . . [would] create a shadow financial system that works for them.”

Ranking Member Patrick J. Toomey’s emphasized the need for “regulatory clarity” with respect to digital assets. Senator Toomey argued that criminals have always “tried to utilize new technologies for nefarious gain . . . [b]ut that is not a reason to stifle new technological developments.” He went on to say that cryptocurrencies were being used both by Russia to evade sanctions and by Ukraine which raised over $100 million in donations.

Witness Testimony

Jonathan Levin, Co-Founder and Chief Strategy Officer of Chainalysis, Inc. emphasized that (i) “the transparency of blockchains enhances the ability of policymakers and law enforcement to detect, disrupt, and ultimately, deter illicit activity” and (ii) a financial system founded on the use of blockchain technology “can enhance the effectiveness of financial regulation more broadly.” He provided several short-term recommendations aimed at reducing the risk of sanctions evasion through digital assets, as well as long-term recommendations aimed at improving detection, disruption and deterrence of broader illicit uses of digital assets.

Mr. Levin’s short-term recommendations include:

  • authorities using digital asset wallet addresses as identifiers;
  • OFAC potentially sanctioning those digital asset exchanges and crypto entities that facilitate sanctions evasion; and
  • expanding information sharing.

His long-term recommendations include, among other things:

  • financial regulators and other law enforcement investing in “blockchain intelligence and analytics capabilities . . . that will enhance their ability to detect, disrupt, and deter illicit uses of digital assets”;
  • improving and promoting interagency coordination through the creation of a Virtual Asset Coordination Center; and
  • greater legal clarity over financial digital assets (e.g., commodities and securities).

Michael Mosier, Former Acting Director, Deputy Director/Digital Innovation Officer at FinCEN, stated that policymakers should focus not only on “chas[ing] bad actors,” but also on preventing exploitation of the vulnerable “from the start.” His recommendations include: (i) expanding the AML and Kleptocracy whistleblower programs to explicitly include “sanctions evasion and any violation of money laundering laws not just BSA violations”; (ii) providing the Kleptocracy Whistleblower Program with “dedicated funds and much higher caps” for those whistleblowers under autocratic regimes; and (iii) reducing global regulatory arbitrage, in part through Congress pressing U.S. FATF representatives to “focus on standardizing licensing across jurisdictions.”

Shane Stansbury, Senior Lecturing Fellow in Law and Robinson Everett Distinguished Fellow in the Center on Law, Ethics, and National Security at Duke University School of Law, detailed the challenges that cryptocurrency presents for law enforcement, including (i) deciphering who is responsible for the criminal activity, (ii) lack of regulation, and (iii) tracing digital assets. He stated that even with the latest blockchain analytics, “investigations can take years to complete.”

LOFCHIE COMMENTARY

While President Biden’s Executive Order on digital assets has been interpreted by some to reflect an open-mindedness on digital assets, recent statements by federal regulators and legislative representatives appears to be moving in a contrary direction – with Senator Brown’s statement being the most aggressively example. (See also Statement of SEC Commissioner LeeDOL Warns Plan Fiduciaries of the Substantial Risks of Cryptocurrency InvestmentsSEC Warns Investors of Risks Associated with Interest-Bearing Crypto Accounts.) Senator Brown echoed a phrase used to describe the Executive Order, saying that the “whole of government” must be put to the service of fighting the the problem of crypto. As to the Senate Banking Committee hearing, the “whole of government” is about amping up regulation.

One potentially interesting exception to the negative take on digital assets is the suggestion in the Executive Order that the Administration is open to considering the introduction of a USD-Central Bank Digital Currency. Perhaps the Administration considers private alternatives to a governmental CBDC as being undesirable and unwelcome competitors. A governmental CBDC, in which all transactions are ultimately routed through the banking system, could afford significant government transparency into spending.  

Email me about this

Primary Sources

  1. Senate Banking Committee Hearing: Understanding the Role of Digital Assets in Illicit Finance