I have not written about the Fed's balance sheet for a few weeks. It still shows that we are in extraordinary times.
The total assets for the week ending October 15 were $1,740 billion, an increase of $882,065 from the previous year. (Wow!) Holdings of U.S. government securities, which for decades have been the primary asset on the Fed's balance sheet, were only $491 billion, down $289 from a year ago. So the Fed has shifted out of U.S. government debt into non-governmental debt.
I like watching reserve balances that commercial banks hold at the Federal Reserve banks. For the week ending October 15, 2008, they were $281 billion, which is $274 billion higher than they were a year earlier. That tells me that we have a considerable way to go before conditions in the credit markets are anywhere near normal.
I would expect that with the enormous infusion of reserves into the banking system there would be growth in money-stock measures. Both M-1 and M-2 are slightly more than 6% higher from their levels a year ago (September to September), which is tiny given what has happened to bank reserves. The banks must be holding massive amounts of excess reserves. When the history of this period is written, it will be interesting to find out what has really been happening, something I cannot see from where I sit.
One sign that the extreme panic may be over is that the three-month Treasury bill rate finally rose above 1% yesterday, October 20. The data are currently here, but will eventually move.