Your Economy (No Politics)

[Bullwinkle]

Fed helps keep the holiday cash flowing

In order to make sure banks don't run short of legal tender in the busiest shopping period of the year, the Federal Reserve pumps up the system with extra bills and coins as banks request each year.

A review of Fed data dating back to 1959 shows a peak in money distribution each year during November and December, and that peak gradually dissipates into the early months of the new year.

There's no specific policy dictating when and how much in reserves are added for the winter holidays, said Fed officials.

The Fed tracks three monetary aggregates, M1, M2, and M3. The narrowest, M1, comprises the traditional definition of money as a means of payment and includes currency in circulation, plus deposits in banks and thrifts. The M2 includes all of that but adds retail nontransaction deposits or money that's stored as reserves. M3, the broadest measure, also adds wholesale deposits, or close substitutes for money.

When economists track the money supply, they're as interested in deposits and reserves as the flow of money between banks and the Fed, putting little weight in seasonal money flows as an economic measure, analysts said.



http://www.marketwatch.com/news/yhoo/story.asp?source=blq/yhoo&siteid=yhoo&dist=yhoo&gui...