Is This the Beginning?

A problem with the Federal Reserve's policies of the last few years has been the lack of a multiplier effect of the easy money (aka Quantitative Easing). The Fed works with the monetary base and the rate at which banks load money in the base creates what's called the velocity of money. This velocity for a long time.

Money goes into the economy when banks in the Federal Reserve system lend against their reserves that make up the monetary base. The monetary velocity has been falling for years and is a key marker of why the Fed has been pushing ropes with quantitative easing.

So, is this changing now? Cullen Roche of Pragmatic Capitalism reports that loans have been growing recently.  If so, this means the money supply gas pedal may finally be pressed down. The recent swing in the financial markets from defensive to cyclical stocks is another confirming indicator.

On balance, this is very good news. Now let's watch for the first tickling signs of our old friend, inflation.