I keep a carefully drawn chart of Fed Bank Credit. Since the Fed first moderated QE in late
2008, they have worked hard to keep the flow of credit within a $250 bil. band. At the
present rate of expansion, Fed Credit will exceed the top of the growth band near mid -
2013. They may just allow the flow of liquidity to go right on and exceed the top of
the band by a handsome margin, but chances are that if the economy is expanding and the
unemployment rate is coming down, more of the voting governors are going to take issue
with the current powerful trend up in credit flow and there will be a stronger voice behind
the idea of scaling down but not eliminating the QE program. FBC Chart (PDF p.7)
This very possible surge of concern about Fed expansiveness is not a done deal, but it is
a contingency for equities and bond investors as well as currency traders that needs to be
kept in mind.
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