A couple of sharp readers mentioned the growth of European deposits at United States banks. The European banks seem risky to some, and the FDIC now insures an unlimited amount of transaction deposits, so millions and millions of dollars flew across the Atlantic to take our safe haven.
What's the underlying trend of money supply growth excluding this hot money? One simple way to get an idea is to exclude non-interest-bearing accounts from core deposits. We call the non-interest bearing accounts Demand accounts. The other components of core deposits are interest-bearing checking, savings accounts and certificates of deposit less than $100,000.
Looks to me that the European hot money is a real phenomenon, but that the non-hot deposits are also growing rapidly, at a pace nearly as strong as in the wake of the Lehman Brothers bankruptcy. About one year after that surge of money supply growth the economy recorded its best growth of the recovery. There is reason to be optimistic that we have some genuine money supply growth now, which will help the economy in the coming months.