WEEKLY FED BALANCE SHEET REVIEW. 24 UP, 5 DOWN
. Federal Reserve: "Factors Affecting Reserve Balances", July 18

- Fed's Treasuries holdings: $781.6bn (-$0.2bn)
- Other central banks' Treasuries holdings: $1,251.5bn (+$6.5bn) (*)
- Other central banks' agency securities: $744.5bn (+$0.6bn) (*)
- Mackinlay's Global Dollar Liquidity Measure: $2,777.6bn (+$6.9bn)

(*) Off-balance-sheet items.
agustin_mackinlay@yahoo.com
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Twenty-nine weekly Fed balance sheets have been published so far this year. In as much as 24 of them, our Global Dollar Liquidity measure has shown gains. In fact, we're growing at a 15.6% annual rate, the fastest pace since January 2005. Liquidity bears do not seem to pay attention to these facts. Rather, they tend to concentrate on market liquidity. Admittedly, things do not look pretty in parts of credit-land. Richard Bernstein, chief investment strategist at Merril Lynch, mentions the L-word no less than 13 times in his very bearish comments on market liquidity [HT: Robert].

Now, as a keen watcher of credit spreads myself, I will concede that expectations of corporate earnings will have to be downgraded sooner or later if spreads continue to surge. But let's not forget one thing: while we are witnessing the greatest episode of wealth creation in the history of civilization, long-term interest rates are toying with ... what? 5%? Analyze that!