First, federal tax revenues are up (thank you tepid recovery) and federal spending is down, at least slightly (thank you Sequester!). This reduces what in the old days we called "Crowding Out" which I discussed here and here some time ago.
Second, bank loans to small businesses are up which I discussed here. (The Federal Reserve does not "print" money. It creates banking reserves and the banks then create money by making loans. Cullen Roche had a great comment on this when said that the government has privatized the creation of money.) This is a very powerful stimulant to the money supply in the real world, not in Federal Reserve Land.
Third, the market is noticing. This morning uber-investor David Tepper, being interviewed on CNBC noticed the falling rate of growth of the government's need for money while at the same time the Fed is still creating excess reserves (through QE) and the infamous money multiplier may be kicking in. In paraphrase I lifted from Seeking Alpha he said,
The U.S. budget deficit over the next 6 months will only be $100B, while the Fed is scheduled to buy about $500B. That's $400B coming out of the bond market and going to investors who can buy more fixed-income, more real estate, more stocks.What does that mean? Less money in the hands of inefficient governments and more money in the hands of efficient businesses. What does that mean? Good old-fashioned growth.
Fourth, Obama is now embroiled in scandals. I'm not here to comment on the scandals or Obama. He is, though, seen as aggressively hostile to free markets and any political damage to him will be taken by market makers as a positive sign for markets.
I'm cautiously optimistic that this is the end of the beginning.
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