Full text of Review (Federal Reserve Bank of Dallas) : September 1972

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Money Stock-

Attention to Series Increases
As Link to Economy Discussed

-

:Relationships between changes in
the money stock and changes in
t~~ level of general economic ac~lVlty have been described varlously but most often in recent
Y~ars from the approach taken by
elther the Keynesians or the monetarists. While these two groups of
economists are in essential agreement on many important points,
~he approaches they take provide
Wo basically different views of
money as a determinant of income
and prices.
The debate between these two
groups has focused fresh attention
on the economic importance of the
money stock. New interest has
bhen created in the mechanics of
~h at,lge in the stock of money and
e lUfluence of this change on
economic activity. New significance has been assigned to move~ents in money, and attention has
r een called to money stock statis~cs, means of measuring the money
s O?l~, and even the problems of
afnVlUg at a workable definition
of the money stock, given the the-

oretical and very practical considera tions involved.
This article takes up the interpretational, measurement, and definitional issues concerning the
money stock. It reviews money
stock statistics, discusses Keynesian and monetarist views of the
role of money in the economy, outlines some of the empirical relationships between money and
economic activity in the United
States from 1953 to 1971, and examines reasons for the official
money stock series, as well as the
technical, practical, and conceptual problems of trying to measure
the money stock.
The economics of money
From either the Keynesian or the
monetarist approach, changes in
the money stock are seen as functions of interest rates. But these
approaches provide entirely different views of the range and scope
of interest rates affected by monetary change. In the Keynesian
model-largely the legacy of John

Maynard Keynes-monetary policy
impinges on a narrow, well-defined
range of capital assets, interest
rates, and expenditures. In the
monetarist model-most often associated with the work of Milton
Friedman-the range of assets,
yields, and expenditures is much
broader.
According to the Keynesians,
the convenience of augmented
money balances achieved when
monetary authorities move to increase the money supply (usually
by purchasing Government securities in the market) does not match
the opportunity costs represented
by the return available on other
assets. The portfolio adjustment
required to regain equilibrium after
such a policy action talres place
mainly (if not entirely) through
purchases of other liquid assets
and, in turn, causes further purchases of somewhat less liquid assets. Keynesians, then, see the effect of a change in the money stock
as a ripple passing across the whole
range of financial assets, losing

.......
Definitions of the money stock

M 1 : Demand deposits adjusted plus currency outside banks

M!! : M 1 plus all commercial bank time and savings deposits except largedenomination negotiable certificates of deposit
M2 + CD's: M2 plus large-denomination negotiable certificates of deposit at commercial
banks
Ms: M2 plus deposits at mutual savings banks and share accounts at savings and
loan associations
L: M2 + CD's plus depo~its at mutual savin~s .banks and Postal Savings System,
share accounts at savmgs and loan aSSOCIatlOns, U.S. Government savings
bonds, and short-term U.S. Government securities

~ ------------------------------------------------------------------....... Review I September 1972
nus·
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llless

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strength (and, therefore, predicttend to rise. Since owners of such
ability) as it rides out from the
assets may feel better off and no
initial disturbance.
one feels worse off, spending tends
Eventually, the ripple reaches
to rise.
to the capital market, bringing a
In the monetarist model, money
change in long-term yields that,
is regarded as an asset with unique
in turn, causes a divergence becharacteristics that allow it to be
tween the costs of funds and the
substituted not only for one class
returns businesses can earn by
of assets but for all assets, financial
and economic. Someone feeling
borrowing for investment in profitmaking operations. This model
short of money balances, the monshows the effects of changes in
etarists say, is just as likely to
the money supply on expenditure
adjust his position by postponing
decisions as coming almost enexpenditures as he is by selling fitirely through the changes in innancial assets. All assets that are
terest rates on financial assetsnot consumed immediately can,
changes brought by policy actions
therefore, be thought of as yielding
of monetary authorities.
future services. And with goods
With changes in interest rates,
and services that are not immediately consumed viewed as yielding
Keynesians see monetary action
future service, the relationship beimpacting on economic activity
tween the value of these future
through possibly two other channels-the availability of credit and
services and the current cost of an
asset can be regarded as a yieldthe worth of assets, particularly
as a rate of return. Monetarists call
the worth of common stocks.
this yield on an asset its "own-rate
The availability effects come
of interest."
mainly from the rigidity of interKeynesians and monetarists are
est rates on certain types of loans,
agreed that holders of assets try
such as mortgage and consumer
to bring the interest yield on a
loans, and the consequent diverstock of money to a point where
gence of these rates from more
the own-rate of interest on the
freely moving market rates. The
money is equal to the own-rate of
gap between market rates and
pegged rates often causes the chan- interest on other assets. Keynesians contend, however, that the
nels through which funds flow to
change, bringing a tightening in
relevant own-rate is the rate on
some forms of credit, even to the
some financial asset. Monetarists
extent that some credit may be
contend that the own-rates on all
rationed or entirely cut off, brakother assets are also relevant.
ing growth in economic activity.
Thus, Keynesians expect people
The housing market provides what to buy financial assets when they
is probably the best-known examfeel they have excess money balple of the economic impact of
ances. Monetarists expect the adcredit availability. Tight credit has justment to be made through direct
sometimes brought residential
purchases of a wider range of asconstruction to a near-standstill.
sets, including such physical assets
The effect of rising interest rates as consumer durables.
on the worth of assets (the wealth
In the monetarist view, changes
effect of the money stock) results
in the stock of money bring small
primarily from changes in the curbut pervasive change in all planned
rent value of existing physical
spending, whether for goods or
assets-a shift that becomes most
financial assets. The impact of
apparent in the changing value of
changes in the money stock is becommon stock. When interest rates lieved to be widespread, reaching
fall, the value of physical assets
well beyond any particular group
and the prices of COmmon stock
of interest rates.
2

While Keynesians and monetarists are not agreed on the mechanics by which changes in money
impact on economic activity, the
money stock is relevant in both
their models. Both groups are interested in the empirical relationships between money, on the one
hand, and spending and prices, on
the other.
Empirical generalizations
Comparison of growth in economic
activity in the United States between 1953 and 1971 with growth
in the money stock suggests that
monetary expansion has had an
important influence on both cyclical fluctuations in the economy
and the rate of general price
change. While no effort is made
here to evaluate the extent and
stability of the linkage between
the money stock,J.nd economic
activity, changes in growth of the
money stock over these years seeIll
to have been definitely related, for
example, to changes in total
spending measured by GNP in current prices.
There also seems to be a fairlY
definite sequencing of changes,
with production, for example, responding more quickly than prices
to monetary change. Production
measured as GNP in constant dollars rose and fell with faster and
slower increases in the money
stock well in advance of changes
in the rate of price change. This
sequencing suggests a tendency for
monetary restraint to slow output
without any immediate effect on
the rate of inflation-although the
effect seems bound to come eventually if the restraint is held long
enough. Conversely, in times of
monetary expansion to stimulate
recovery, there seems to be a fairlY
clear tendency for the rate of price
increase to rise much sooner after
an advance in production.
According to definitions developed by the National Bureau of
Economic Research, there were
four recessions during this period-

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~Iuctuations in money stock
Influence cyclical changes in spending more than prices
RATIO SCALE
BILLION DOLLARS

(SEASONALLY ADJUSTED)

220 200180 160 _
140 _
OFFICIAL MONEY STOCK (Ml)

120 100~~~~__~-L~U--L~~~~~~~__~~__~~__~~~~~
1, 100 _-r~:--_ _ _---'~':l""""_ _
(_S_E_A_S_O_N_A_L_LY_A_D_JU_S_T_E_D_A_N_N_U_A L_R-:A::-T_E)
r

-r.....,.____

1,000 _
900_
800 700 600 _
500 IN CURRENT DOLLARS

400 -

300-L~~L-~~~'U~__~~
!
~~~~-L~__~~~~~~r~'~~
!
(SEASONALLY ADJUSTED ANNUAL RATE)

700 600 _
500 -

350~~~~__~-L~~~~~~~~~~~~~__~~__~~~L--L-

150 1958=100
130 _

(SEASONALLY ADJUSTED)

I

110 _
100_
90 _ ....:.....__- - 80

IMPLICIT PRICE DEFLATOR

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"
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'53 '54 '55 '56 '57 '58 '59 '60 '61 '62 '63 '64 '65 '66 '67 '68 '69 ' 70 '71 '72

~OTE: Shaded areas show recessions as dated by the National Bureau of Economic Research.
OURCES: Board of Governors, Federal Reserve System
U.S. Department of Commerce

........
nUs'llless Review I September 1972

3

CONCEPTUAL PROBLEMS IN MEASURING THE OFFICIAL U.S. MONEY STOCK
AGREED·ON PROBLEMS

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DEBATED PROBLEMS

Factors that cause
official money stock
to overstate true
level of public's
spendable balance

Factors that cause
official money stock
to understate true
level of public's
spendable balance

Factors that cause
official money stock
to overstate true
level of public's
spendable balance

Factors that cause
official money stock
to understate true
level of public's
spendable balance

Mail
(checkbook)
flost

Nonbank travelers'
checks and
mone~ orders

Deposits owned by
nonresident
foreigners

Major credit cards

Compensating
balances

Overdraft privileges
at banks
Deposits owned by
U.S. Government

in 1953·54, 1957·58, 1960-61, and
1969-70. Each was preceded by a
marked slowing in the growth rate
of money, although the length of
time varied. Before the recession
of 1960-61, the money stock actually declined. Also, each of the
cyclical expansions between these
recessions was preceded by a definite acceleration in the growth of
money.
Although considerable effort has
been made-by Keynesians and
monetarists-to determine the nature and extent of the effects of
monetary change on economic activity, the evidence is still not conclusive. Analysis does, however,
suggest two generalizations
broadly accepted by economists of
both schoolso That the acceleration and deceleration of monetary growth is a
major influence on cyclical changes
in total spending, in both nominal
and real terms.
o That short-run variations in
monetary growth have less impact
on price movements than does
total spending.
Since economists of both
Keynesian and monetarist persuasion want to base their evaluations

of the issues on evidence developed
by statistical, mathematical, and
computer models, both groups are
interested in the official money
stock series, how it is computed,
and what items it is defined to include and exclude. So that allowances can be made in interpreting
and analyzing the impact of monetary change, both groups want to
understand the statistical and
methodological difficulties in computing the money stock.
Measuring the medium
Money has been officially defined
by the Federal Reserve aso Currency in circulation outside the banking system
o Plus demand deposits other
than U.S. Government deposits
and domestic interbank deposits
o Less cash items reported in
process of collection and Federal
Reserve float.
This is the definition used in measuring the money stock.
The distinguishing characteristic of this definition-often referred
to as the narrowly defined money
stock, or MI-is that it includes the
principal assets used as a medium
of exchange. Most other financial

assets cannot be spent directly
until they are converted into MI'
And even if other assets can be
converted easily, the conversion
may involve a capital gain or loss.
This narrowly defined money stock
differs further from other assets
in that-aside from price changes
affecting all assets-holders of
M 1 re" eive no explicit return of
c
interest.
Interbank deposits are not included because they cancel each
other out. Deposits due to banks
are exactly equal to deposits due
from other banks. Cash items in
process of collection are not included because such items are the
checks being processed within the
banking system at anyone time.
Federal Reserve float is not included because the float arises
only from checks clearing through
the banking system. 1 And while
coin and currency held in the
vaults of the commercial banks are
not included-because, strictly
speaking, they are not yet in circulation-currency held by other
financial institutions (such as
savings and loan associations,
mutual savings banks, and life insurance companies) is included,

1. Federal Reserve fl oat is t he di ffer ence between t he amoun t of uncollected item s ( or ca sh items in process of collection) and deferred availability credit.

This fl oat. represent ing a n extension of Federal Reserve credit to member banks. arises solely because t he pa yment schedule for determining the
conversion of deferred availabilit y cl'edit to actual credit does n ot m atch t h e collection credit schedule. Under a fi xed schedule established by the F ederal
Reserve System. reserve ba la n ces become ava ilable to commer cia l banks whet her checks have been collected 01' n ot. Because of variations in the volume
of checks processed by F edera l Reserve banI,s a n d fa ilures to m eet collection s chedules ( as for exam p le. because of bad weather ) F ederal Reserve
float is subject to lar ge daily. weekly. a nd season al variation s.
•
E ffective September 1. a chan ge in Federal Reserve r egula tion s w ill speed up check clearing. N ew procedures will requi re t hat banks payoff checks
drawn on them in immediately available funds on th e same day checks al'e p resented for p ayment. This chan ge will eliminate most float.

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METHOD OF DERIVING THE OFFICIAL U.S. MONEY STOCK (M I )

~AND

DEPOSITS ADJUSTED

« 1)

Gross demand deposits at commercial banks
2) lESS:
Deposits due to U.S. commercial banks
( 3) EQUALS: Gross demand deposits at commercial banks, excluding interbank
deposits
( 4) lESS:
Gross demand deposJts held by U.S. Government
( 5) EQUALS: Gross demand deposits of the nonbank public at commercial banks
« 6) lESS:
Cash items in process of collection
7) lESS:
Federal Reserve float
( 8) PLUS:
Foreign deposits held at Federal Reserve banks
( 9) EQUALS: Demand deposits adjusted (demand deposit component of the money
stock)
£!!!!RENCY IN CIRCULATION
(10)
Total currency issued
(11) lESS:
Currency held in vaults of commercial banks
(12) EQUALS: Currency in circulation (currency component of the money stock)
Demand deposits adJusted
( 9)
«12) PLUS:
Currency in circulation
13) EQUALS: TOTAL MONEY STOCK

along with the demand deposits of
such institutions.
Conceptual problems ...
Measurement of the official money
stOck-the stock based on a concept of money as a medium of exchange-raises several theoretical
Problems. Some are agreed on, and
sOllle are not. There is general
ar~ement, for example, that inc USlon of demand deposits fails
to take into account that some dePosits represent compensating bal~ces and, therefore, tend to overs te the balances available for
Spending. Inclusion of mail float
alb overstates the balances availSo
a Ie for spending. It is also generally agreed that failure to include
nonbank travelers' checks and
tnoney orders understates the
alllo unt of money available for
SPending.
Mail float-Because of the dollar
mounts always in transit in the
~l'lll of cheeks, bank ledgers show
f gher deposit totals than records
depositors would show. Data rehorted by issuers of currency and
Uank~ with deposi~ liabilities are
Sed In measuring the money sup-

°

nusiness Review I

Septemb~r 1972

ply, rather than data reported by
holders of currency and deposits.
A discrepancy between holder records of deposits and bank ledgers
arises from mail (or checkbook)
float-the dollar amount of checks
that deposit holders have drawn
against their accounts and mailed
but that are not yet credited to
payees' records.
Compensating balances-Because
deposits held as compensating balances are not available to their
owners for their discretionary use,
they are (theoretically, at least)
not part of the money stock. Not
only is the total of these balances
very large-in the billions of dollars-but the total is not necessarily
a function of the totals of either
business deposits or business loans.
Until the credit crunch of 1966,
banks were fairly loose in their
enforcement of these requirements.
Part of their looseness was due to
the generally easy availability of
credit through late 1965. And part
of it was due to the large amount
of bank float allowed to substitute
for compensating balances. Banks
were simply not able to measure
collected funds close enough to in-

sist on strict maintenance of compensating balances.
However, as a result of the recurring periods of restrictive monetary conditions since 1965-in
1966, 1969, and early 1970-banks
have tended to be more insistent
about the maintenance of these
balances. And business borrowers,
anxious to maintain bank lines of
credit, have been more willing to
maintain their required balances.
These recent restrictive periods
have, in fact, caused large numbers
of businesses to formalize their
bank credit arrangements, either
through assured lines of credit or
through definite commitments
from their banks. In either case,
the result has been a further increase in the total of compensating
balances.
Nonbank instruments-Several
arguments have been presented for
the inclusion of nonbank travelers' checks and money orders in
the official money stock. One is
that a person using currency or a
bank draft to buy one of these instrume~ts has, obviously, not reduced his holdings of the medium
of exchange. He has merely shifted
5

the composition of his money balances. In fact, since companies
issuing these instruments operate
on a fractional reserve basis, conversion of demand deposits or currency into a nonbank traveler's
check or money order actually represents a net expansion of the
money stock.
Another is that because travelers' checks and money orders issued by commercial banks are
treated as officers' checks, they are
included in the official money
stock. The exclusion of similar issues by companies other than
banks creates an asymmetry in the
definition of money.
Still another is that when these
nonbank instruments are received
at a commercial bank, they are entered as cash items in process of
collection. To the extent, therefore, that they are deposited with
commercial banks for collection,
these instruments understate the
true money supply (at least as it
is now defined) .
While the total of compensating
balances at commercial banks
might be hard to measure, collection of data on nonbank travelers'
checks and money orders could be
fairly easy. There are only three
nonbank issuers of travelers'
checks. And while there are many
nonbank issuers of money ordersincluding an unknown number of
mutual savings banks and savings
and loan associations-there are
only six issuers with operations
large enough to have any significant impact on the money stock.
And of these, the largest is the
Postal Service. Effects of nonbank
issues of travelers' checks and
money orders on the money stock
could be monitored merely by requiring that nine issuers of these
instruments report their operations
to the Federal Reserve System.
, , , and possible problems
Other problems with the official
definition of the money stock are
not so clearcut. Some economists
6

contend that inclusion of deposits
owned by nonresident foreigners
tends to overstate the money
stock. And others disagree. Also,
some economists say the exclusion
of credit cards, overdraft privileges
at commercial banks, and U.S.
Government deposits understates
the true level of the stock. And
here again, there is disagreement.
Credit cal'ds and overdraftsThe spreading use of credit cards,
which are often more generally accepted as a means of payment
than personal checks, and overdraft privileges at banks may
imply that the public's reported
holdings of money are actually
far less than the amount instantly
available for spending. Some
economists point out that by providing purchasing power on demand, both these credit devices
share many of the characteristics
of money.
Others point out, however, that
credit cards and overdrafts are
also different from money in one
important respect. Their use requires the automatic assumption
of a matching liability. Assumption
of an obligation to make future
payments creates a liability that
exactly offsets the asset. This
difference may make it inappropriate to include these items in
the money stock.
Foreign-owned depositsDeposits owned by foreign commercial banks have been counted
as part of the money stock since
1960, and deposits owned by
central banks and other official
overseas institutions at Federal
Reserve banks have been counted
since 1962. One reason for including these deposits is that they can
be used in this country for investment and other expenditures in
much the same way balances of
other deposit holders are used.
Another reason is that exclusion
of these deposits would (theoretically) require exclusion of U.S.
currency abroad. Since estimates
of U.S. currency circulating

abroad are not available, an accurate adjustment to the money
stock would be hard to make.
As an argument against the
inclusion of these deposits, however, some economists point out
that many of the dollars held in
this country by foreigners are not
related to the domestic economy.
Many foreign deposits are different from domestic deposits in that
they perform functions related to
the role of the U.S. dollar as the
world's dominant reserve and vehicle currency.
Foreign central banks and
governments commonly use dollar
accounts to settle financial transactions with countries other than
the United States. Foreign central
banks also hold dollar deposits SO
that they can use the dollars in
intervening in foreign exchange
markets to maintain the exchange
rates for their own currencies.
Much of the balance accruals in
the accounts of foreign central
banks and payments out of them,
then, reflects the payments positions of their countries relative
to all other countries, and not just
to the United States alone.
With the enormous growth in
world trade since World War II,
the trade invoiced and financed in
dollars increased. And with this
increase, foreign deposits in this
country could probably be expected to grow without regard to
the domestic economy. Also,
growth of the Eurodollar market,
which is external to the domestic
economy, may have contributed
to the rise in foreign deposits.
And finally, fluctuations and expansion in foreign deposits may
sometimes reflect the increased
(and changing) foreign operations
of U.S. corporations.
Government deposits-The
exclusion of U.S. Treasury depoSits creates another conceptual
problem. These deposits are not
included primarily because they
do not represent money in the
hands of the public. Also, some

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economists believe changes in
balances have only minor
lInpact on the Government's expenditure decisions.
Several arguments have been
advanced favoring the inclusion
~ Government deposits. First, the
overnment's sovereignty is not
considered in the compilation of
lU~st other economic data. In figurmg GNP, for example, the Government's share is added directly
to private production.
. Second, the Treasury manages
lts cash in much the same way
other large institutions manage
their funds. Many state and local
~overnments manage their deposit
alances so that a minimum
balance is maintained to compensate banks for the services they
provide. This, of course, is also
the case with corporations obli~ated to maintain compensating
alances. To meet these requireents , some corporations arrange
or
b their banks to adjust their
. alances daily through automatic
lnvestment accounts. 2
Third, the official definition
of lUoney is designed to include
assets serving as means of paylUent. Since Government demand
deposits meet this criterion, it is
reasoned that they should be inc~uded in the official measurement
o the money stock.
~oney

f

Technical deficiencies
In addition to the conceptual
problems of defining a measurable
:one~ stock, there are several
t ChOlcal problems with the cons ruction of the official money
~tock series. Two of these relate
.0 the overstatement of cash items
~ process of collection. A third
elates to the infrequency of rePorting by nonmember banks.
t" Cash items in process of colleclOn through the check-clearing
sYstem include three major classi-

-2.

fications of entries expressly excluded from computation of the
money stock. One is Government
payments. Another is entries due
to bank accounts. The other is
nonbank travelers' checks and
private money orders.
Such items as Treasury checks,
Postal Service money orders, redeemed savings bonds, food
stamps, coupons on Government
securities, and possibly some noncash items make items in process
of collection larger than mere private checks in transfer and, when
deducted from private demand
deposits to arrive at that component of the money stock, cause
the true level of spendable money
to be understated.
Total deposits are also distorted
by nonbank travelers' checks and
private money orders in process
of collection through the system.
They distort money supply calculations to the extent that they
exceed the demand deposits from
which they are deducted. By overstating items in process of collection, they understate the adjusted
level of demand deposits.
The basing of money stock data
on weekly and monthly reports of
only the banks that are members
of the Federal Reserve System
creates still another technical
problem. Balances of depositors
with accounts at nonmember
banks can only be estimated on
the basis of observed changes at
member banks, and the estimates
can be adjusted only every six
months, when call report data are
available for all banks.
Alternative definitions
Some economists feel that the
medium-of-exchange concept is
not altogether meaningful in the
definition of the money stock. Two
objections to this definition have
been raised-one major and one

minor. The minor objection is that
the medium-of-exchange criterion
is an uncertain guide to the classi~cat~on of assets. The major objectIOn IS that this criterion begs the
question of whether the central
feature of money is its use as a
medium of exchange.
Regarding the first objection
critics point out, first, that cur- '
rency includes $10,000 notes
which can seldom be used in transactions. Ordinarily, these notes
must first be converted into
smaller denominations.
Second, critics point out that
demand deposits are not altogether
as readily acceptable a medium of
exchange as currency. Holders of
demand deposits often cannot
complete transactions directly by
check, especially where they are
not known to the other parties,
and must first convert their drafts
into cash, either at their banks or
with someone that does know
them .
In practice, these situations,
of course, pose only minor problems. They do, however, point up
the ambiguity of medium of exchange as a theoretical concept.
The more fundamental objection relates to the matter of
whether the essential feature of
money is its use as a means of payment. Critics point out that a
money economy is distinguished
from a barter economy by the
separation of the acts of sale and
purchase. In a money economy, a
person does not have to depend
on the coincidence of finding
someone that both has what he
wants and wants what he has. He
has only to find someone that
wants what he has. He can then
exchange his goods or services for
money, finding someone else that
has what he wants. For the act of
purchase to be separated from the
act of sale, there must, of course,

~n Opening

a n au tomatic investment account, a ba nk debi ts t he demand deposit ba la nce of its corpor ate customer at t he close of t he busin ess day (but
before the end-of-day bJllan ces a re prepared ) by t he a moun t outstanding in excess of t he agr eed minimum compen sating ba lan ce and credits a
r orl'Owing account. T hese fund s a r e borrowed overnig ht nnd secured by collatel'nl. The next day, after t he bank prepares its opening ba la n ces, t he
unds are automatically t ransferr ed back and credited to the corporation 's account .

nUs'Iness Review I Septem~er 1972

7

Cyclical patterns show more similarities than differences
(SEASONALLY ADJUSTED ANNUAL RATES OF CHANGE)

PERCENT

11 --------------------------------------------------------------------------------~

15------------------------------------------------------------~----------------~--

12 - M2
9-

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10-

6-

2-

o ....................................................................
-2 -

18 --------------------------------------------------------------------------------12 -

16 ----------------------------------------------~---------------------------------

L

10 -

0 .. · .. · .... ·· .......................................................... ..
-2 I
'53

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'54

'55

'56

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'57

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'58

' 59

........................................................................................................................
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'61

'62

'63

'64

'65

'66

'67

SOURCES: Board of Governors, Federal Reserve System
Council of Economic Advisers
Millon Friedman and Anna Jacobson Schwartz
(Monetary Statistics of the United States: Estimates, Sources, Methods)

8

1
'68

I
'69

I
'70

1-1
'71 '72

I

I

i

be some asset that is generally
accepted in payment-that serves
as a medium of exchange.
Critics argue, however, that
because the two acts are not simultaneous, there must also be
some asset that serves as a store
of value-CIa temporary abode of
Purchasing power." With this
asset, a seller holds the proceeds
of a sale until he is ready to purchase. Arguing that both features
~~ money are required to separate
e two acts into distinct trans~ctions, critics contend that such
~hnot necessarily always the caseat the something generally accep.ted in payment may not necessarIly
Se . coincide with the something
rvIng as a store of purchasing
POWer.
To illustrate this point, they
argUe that time or savings deposits
~ay be the main abode of purchas~ng Power for many low-income
amilies and that currency (or

money orders) may be their main
means of payment. For such people-at least at times-savings
deposits may be a closer substitute
for currency than demand deposits, which the official definition
treats as almost interchangeable
with money. At times, in fact,
savings deposits and currency may
be closer substitutes than either
is for demand deposits.
Economists that view the
medium-of-exchange concept as
meaningful contend, however, that
anything a person owns is an abode
of purchasing power and that any
asset allows a person to separate
sales from final purchases. Common stocks, equity in a house, or
deposits of whatever kind can serve
as a store of value. All wealth is
a store of purchasing power, they
say, for consumers that are not
liquidating their economic substance. This line of reasoning leads
them to the conclusion that the

temporary-abode concept would
define money as a society's entire
wealth-with the result that the
far n~r.rower medium-of-exchange
definItIOn was still warranted.
Insisting that a nation's money
stock includes far more than currency and demand deposits, some
.
econOmIsts have developed
broader concepts based on the
inclusion of other financial assets
liquid enough to be called nearmoney. These include time deposits at commercial banks
deposits at mutual savings banks
savings and loan share accounts '
Pos.tal System savings deposits, '
Senes E savings bonds (redeemable on demand for amounts
stated in advance), the cash surrender value of life insurance
policies (available on demand by
termination of life insurance policies) , balances at stockbrokers,
and policy dividends left at interest with life insurance companies.

.......
'Trend patterns also remain fairly close over the long term
BILLION DOLLARS
(SEASONALL Y ADJUSTED)
0 ___________________________________________________

90

500_

300_

I_~---------------M1

100_
o~

I

..------- .-"" ----

I
'54

I
'56

'58

'60

'62

'64

I

I

I

'66

'68

'70

'72

SOURCES: Board of Governors, Federal Reserve System
Council of Economic Advisers
Milton Friedman and Anna Jacobson Schwartz
(Monetary Statistics of the United States: Estimates, Sources, Methods)

~----------------------------------------------I

llUs'

llless Review

September 1972

9

When time and savings deposits
other than large-denomination
certificates of deposit at commercial banks are added to the narrowly defined money stock (M 1),
the yield is called M 2 • This is the
designation used in financial statistics in the Federal Reserve
Bulletin. A related concept,
termed Ms in Bulletin statistics,
refers to the further addition of
deposits at mutual savings banks
and savings and loan associations.
When all categories of near-money
are added to currency and demand
deposits, one measure of t otal
liquidity is derived.
Another common definition of
money is M 1 plus total time and
savings deposits at commercial
banks, including large-denomination CD's. Referred to as broadly
defined money, this concept is
identified as M2 CD's. The symbolic designations applied to various definitions of money are not
uniform in economic literature,
however, and this definition is
sometimes designated simply as
M 2 • Until commercial banks began
issuing large-denomination negotiable CD's in 1961, M2 and M2 +
CD's were, of course, the same.
And although M2 CD's still
appears in economic analyses, its
use seems to have diminished in

+

+

CORRELATION OF VARIOUS MEASURES OF MONEY STOCK
AND SELECTED LIQUID ASSETS
(M atric es of si mpl e correlation coefficients
based on quart erly data exp ressed as perc entage ch anges)
Period
and
measure

M,
1.00
.79
.79
.80
.62

M,+

M,

M,

L

0.79
1.00
1.00
.99
.36

0. 79
1.00
1.00
.99
.36

0.80
.99
.99
1.00
.35

0.62
.36
.36
.35
1.00

1.00
.75
.62
.63
.63

.75
1.00
.83
.93
.81

.62
.83
1.00
.78
.90

.63
.93
.78
1.00
.82

M, . . . .. . . . . .
M2 ... . ... . . .
M2 + CD's ...
M3 · . . . . . . . . .

L . ... .......

1.00
.83
.74
.74
.73

.83
1.00
.89
.95

.74
.89
1.00
.86
.86

.74
.95
.86
1.00
.76

-

.63
.81
.90
.82
1.00

1953-60

1961-71

M, · . . . . . . . . .
M2 .... . .... .
M2 + CD's . , .
M . . ....... .
3

L

. ........ ..

1953-71

M, ... .. .... .
M2 .. . . .. . .. .
M2 + CD's ...
M · . .. . . . . . .
3
L

. . .. . . .... .

.77

.73

.77
.82
.76
1.00

-----------------------------------------------------------SOURCES : Board of Govern ors, Federal Rese rve System
Cou ncil of Economic Advise rs
Federal Reserve Bank of Dallas
Friedman and Schwartz

recent years- and for two important reasons.
First, since large CD's are negotiable, they are more nearly comparable to market instruments,
such as commercial paper, than t o
items classified as time deposits.
Second, except at maturity,
large CD's cannot be sold on demand for a sum fixed in advance.

Since they are negotiable, t hey
can be sold. But t heir market value
is determined by current interest
rates. If interest rates have
changed since the certificate was
purchased, its value will have also
changed.
It sometimes makes very little
difference which definition is
used. Cyclical patterns in the

New member bank

The First National Bank of Colleyville, Colleyville, Texas, a newly organized
institution located in the territory served by the Head Office of the Federal
Reserve Bank of Dallas, opened for business August 18, 1972, as a member of the
Federal Reserve System. The new member bank has capital of $300,000, surplus of
$300,000, and undivided profits of $150,000. The officers are: Gearld C. Clark,
Chairman of the Board; Thomas W. Ellison, President and Chief Executive
Officer; and Rupert L. Hamilton, Vice President and Cashier.

10

-

CD' s

alternative definitions of money
S?oW more similarities in definitIons than differences, and trend
patterns remain fairly close over
~?e long term. But.there have been
lInes when rates of change in
~7e money stock varied appreciay, depending on the definition
used. The differences have been
~ost pronounced when commercIal banks were gaining or losing
~eposits relative to other financial
~nstitutions, such as savings and
tan associations. In the 1950's,
or example, share accounts at
~avings and loan associations
Illcreased faster than time and
bavings deposits at commercial
anks. In the 1960's, the situation
Was reversed.
All the major definitions of
ro.n~y have also shown many simiarltIes to measures of totallilUidity . But there have also been
~ ear differences, as when market
Interest rates have moved higher
r lower than the ceiling rates at
dan~cs and thrift institutions, int UClUg sharp shifts of funds ber1~en deposits and market secu.1 Ies. In 1969, for example, market
Interest rates rose well above the
rutes deposit institutions were
~ oW~d to pay on deposits, and
C
ep?SIts fell. Then, in 1970, rate
elhngs on large CD's were raised

b

and relaxed. With many market
rates declining, funds flowed
rapidly back into banks and thrift
institutions.
A final consideration
Determination of the money stock
may always fall short of the ideal.
Not only are the conceptual problems of defining the money stock
difficult, but technical and reporting problems may stand in the
way of the development of a series
that is both ideal and workable.
These difficulties, however, do
not mean that efforts to make
broad judgments about the significance of growth rates in various
statistical measures of money can
be abandoned. On the contrary,
they call for continuing studies
of relationships between the alternative indicators of money and
measures of economic activity,
such as total spending and general
price levels. As efforts are made
to determine which definition of
money has the most stable and
predictable empirical relationships to spending and prices, it
may well be that both the broad
and narrow definitions of money
are useful in interpreting the
course of economic developments.
-Lacy H. Hunt, II

.......
New par banks
The Peoples Bank & Trust Company, Blanchard, Louisiana, an insured
nonmember bank located in the territory served by the Head Office of the Federal
Reserve Bank of Dallas, was added to the Par List on its opening date, August 1,
1972. The officers are: Wayne Ladner, President, and Rodger Thomason, Cashier.
The Twin City Bank, Texarkana, Texas, an insured nonmember bank located
in the territory served by the Head Office of the Federal Reserve Bank of Dallas,
was added to the Par List on its opening date, August 14, 1972. The officers
are: H. H. Wommack, Jr., President; Basil S. Hoag, Jr., Executive Vice President;
and Robert G. Fuller, Cashier.
...........

nUs·!ness Review I September 1972
.

11

Federal Reserve Bank of Dallas
September 1972

Statistical Supplement to the Business Review
Total credit at weekly reporting
banks in the Eleventh District rose
sharply in the four weeks ended
August 23. Reflected in the rise was
a heavy increase in loan demand.
Total deposits declined moderately, and, as a result, banks increased
their borrowings in the Federal
funds market substantially.
The surge in bank loans reflected
rapid increases in every major category. To accommodate loan detnand, banks, on balance, reduced
their security holdings. Although
~otal investments declined, holdIngs of Treasury bills and longterm Government issues rose.
Net inflows of time and savings
deposits were slightly more than
normal for that time of year, partly
as a result of a moderate rise in
large CD's outstanding. The gain
Was more than offset, however, by a
decline in demand deposits. Although banks increased their borrOwings in the Federal funds market, borrOwings from other nondeposit sources changed little.
Seasonally adjusted, total employtnent in the five southwestern
states rose in July to the highest
level since March. But with the labor fotce growing faster than emPloyment, the unemployment rate
:ose to 4.6 percent from 4.3 percent
In June.
All categories of nonfarm emPloyment showed gains over a year
?efore. And except for manufacturIng and mining, most categories
shOWed advances over a month be~ore. Employment in manufacturIng dropped 0.4 percent, with the
nbUtnber of workers declining in
oth the durable and nondurable
gOods sectors. But employment was
u.p 0.7 percent in construction and
O percent in trade.
.6

The seasonally adjusted Texas inyear earlier. And most of the industrial production index slipped
?rease was in livestock prices. The
slightly in July from the record
mdex of livestock prices rose to 29
high reached in June. At 133.3 perpercent higher than a year before.
cent of its 1967 base, the index
The crop index was only 6 percent
showed monthly declines in every
higher than in JUly 1971.
major category except the manuCash receipts from farm marketfacture of nondurable goods.
ings in District states totaled nearManufacturing of nondurables
ly $3 billion in the first half of the
continued to increase, with its largyear-up 13 percent from the first
est gains in paper and allied prodhalf of last year. This increase was
ucts, up 5.3 percent, and petroleum
well ahead of the national average.
refining, up 4.3 percent. Output of
Higher prices and slight increases
durables fell 1. 7 percent, as proin marketings supported 13-percent
duction of transportation equipgains in both crop and livestock rement dropped a substantial 5.2
ceipts. The rise in farm receipts and
percent and the output of stone,
the good prospects for crops have
clay, and glass products declined
placed the 1972 outlook for farm
2.8 percent. Nevertheless, the apincome in these states well above
parel industry was the only area of
income in 1971.
manufacturing that failed to show
a gain over a year earlier.
Registrations of new passenger auThe decline in mining was due
tomobiles in Dallas, Fort Worth,
primarily to a 2.0-percent drop in
Houston, and San Antonio dropped
the production of crude oil. The
10 percent in JUly but were 14 peronly gain in mining was in natural
cent higher than in JUly 1971. Cugas liquids, up 1.3 percent.
mulative registrations for the first
seven months of 1972 were still 12
Prospects for crops in states of the
percent higher than in the same peEleventh District are significantly
riod last year. All four metropolitan
better than last year, when drouth
centers showed increases in cumuin the early part of the growing
lative registrations, ranging from
season caused a sharp drop in pro11 percent in San Antonio to 17
duction. The cotton crop in these
percent in Fort Worth.
five states was estimated at 5.5 million bales on August I-up a third
Department store sales in the
from 1971 and a fifth from 1970.
Eleventh District were 11 percent
Production of grain sorghum is exgreater in the four weeks ended
pected to be slightly higher than in
August 26 than in the comparable
1971, despite a moderate decline in
period last year. Cumulative sales
planted acreage.
through that date were 10 percent
Prices of meat animals have
higher than in the corresponding
again boosted the index of prices
period a year before.
received by Texas farmers and
ranchers. Although only slight adThe Federal Power Commission
vances in crop and livestock prices
has changed its policies regarding
were posted in the month ended
the pricing of natural gas sold inJuly 15, gains were enough to push
terstate to allow possibly higher
the index 20 percent higher than a
(Continued on back page)

CONDITION STATISTICS OF WEEKLY REPORTING COMMERCIAL BANKS

Eleventh Federal Reserve District
(Thousand dollars)
Aug . 23,
1972

July 26,
1972

Aug. 25,
1971

948,629
8,1 26,998

930,762
8,032,420

904,189
6,881,874

3,625,408

3,606,025

---3,164,2 88

188,709

190,757

122,227

1,165
93,235

1,157
79,337

519
47,891

5,694
453,719

ASSETS

3,904
405,784

5,306
434,259

Fe d eral fund s sold and se curities purchase d

Tota l de posits • • ..• . ............•.•...•......

und er agr ee ments to rese ll ... • . • . • •.. •• • • . .•

Other loans and discounts, gross . .. . ... ... . . ....
Comm ercial and industrial loans .• . . .. ....... .
Agricultural loons, excl uding CCC
certifica tes of interest •••. .. . . . ... ... . .. .. .

---- ----

l oans to brokers and de alers for
purcha sing or carrying:

U.S. Go vernment securiti es . . . . .. . ... . . .. .. .

Other securities . ... . ...............•.. . ..
Other loa ns for purcha sing or carrying :

U.S . Government secu rities ... .. .. .. ... . .. . .
Other secu rities .... . . ....... ... ... . .. . ...
Loan s to non bank fl nan ci al in stitutions:
Sal es Rnc nco, persona l Rna nee, factors,
and oth er business cred it co mpan ies . . . ....

129,968
661,439
1,083,357
16,365
32,538
907,874

141,599
633,692
1,052,565
15,343
30,549
896,265

149,626
485,089
828,412
13,559
29,32 1
783,749

0
927,527
3,605,184

Other . . .. . .. .... ....... . ... . ...... . ...
Real estate loan s . .. . .. " ...... .. . ... . . . . ..
l oans to dom estic comm ercial bonks• . . .... ... .
loon s to foreign bonks•.•• ... .. . .. .. ... .. ...
Consum er instalm ent loons. ... .... . • . . . • . •.. .
loan s to forei gn governm ents, ofRcial
ins titution s, central bon ks, and international
institutions .. . . . ..• • •. •.. .•. . ...... . . ... .
Oth er loans.• . • . .. ... . ... . . . .. . . . •........
Total investm ents ••.. ........ . ..... . . . .. . ....

Aug . 23,
1972

LIABILITIES

0
975,443
3,611,296

0
817,628
3,103,815

140,494
0

1,003,884
128,298
0

- - --

---969,712

Total U.S. Government securities .. .. . ...... . ••
Trea sury bills . •• . . . .• . . . .. ... ........ . . .
Trea sury certificates of ind ebte dn ess . •......
Trea sury notes and U.S. Gov ernment
bonds maturing :

993,212
158,934
0

W ithin 1 year ........ .. .. .... .... .....
1 year to 5 years.. .• ... . • . .. .. •. . .•.. .
After 5 years . .. ...•. ..•... ... ... . ... .

136,008
490,847
207,423

139,025
519,031
171,162

135,982
602,817
136,787

84,172
2,293,071

112,014
2,290,758
14,833
223,979
1,419,258
840,014
106,676
422,781
10,769

15,810
138,900
1,170,977
981,346
96,403
408,938
8,328

602,5-46

589,676

470,912

Individuals, partn erships, and corp ora tions.. . •
Sta tes and political subdivisions. .. . .. .• . ...
U.S. G overnm ent . . •. ... ...... . .. ... . . . ..
Ban ks in th e, United States . . . .. ... . . . . .. . . .
foreign:
Governm ents, official institution s, central
banks, and international institution s.. . . ..
Comm ercial banks . .. . ... .. . . . . .... ....
Certifl e d and offlcers ' ch eck s etc ... . .... ....
,
Total time and savings d epo sits. . • .. .. .... . ...
Individual s pa rtn ership s and corporations:
,
,
Saving s d eposits.. . .. . .. .... . ... .. ... . .
Oth er time d epos its . . .. ... ...•. .. . .... .
States an d political subdivisions . • •• . .. .. . . .
U.S. G overnm ent {includ ing postal soving s) . . . .
Bonks in th e United Stotes• . .. .. . ... .. .. .. .
Fo rei gn:
Governm ents, official institutions, central
banks, and internati ona l institutions .. .. • .
Comm ercial ban ks . . .. .. .. .... . ..•. .. . •
Fed eral fund s purcha se d and securities sold
und er agr ee ments to re purchas e . . . .... . ... . . .
Oth er liabilities for borrow ed money . . .....•. . . .

12,299,829

---6,642,554
4,730,117
386,807
81,800
1,312,871

12,366,254

---6,80 1,081
4,7 45,803
38 2,146
209,100
1,325,987

-

Aug . 25,
1971

-

10,929,399
6,266,575
4,269,215
321,685
186,393
1,359,886

2,789
36,838
91,33 2
5,657,275

3,085
37,68 1
97,279
5,565,173

6,293
31,897
91 ,206
4,662,82 4

1, 154,668
2,937,792
1,4 29,924
26,881
93,010

1,1 82,641
2,817,833
1,43 3,507
24,484
89,808

1,060,334
2 510,922
'987,836
29,786
56,546

13,900
1,100

15,800
1,100

16,300
1,100

1,979,174
51,935
450,516
139,763
18,184
1,132,033

1,798,496
70,660
441,924
141,25 2
18,397
1,126,669

1,482,10 4
41,656
354,183
132,556
21,589
1,065,295

TOTAL LIABILITIES, RESERVES, AND
CAPITAL ACCOUNTS .... .. .. .. . ... . .... 16,071,434

15,963,652

Other liabilities •• • • • •. . • ....•• •.••.•••• .. .• . •
Rese rves on loans•• .. .. .•. .• .. .. .. .. .... . . . ..
Reserves on se curities .. . . •. ..... . ... . . . .......
Total capital accounts . .... . . . .... . .•. . .••••.•

-

49,768
1,895,453

15,135
219,594
1,394,4 12
901 ,559
106,962
372,515
12,629

Total demand de posits • .• • .. ..• •.. .. • ... ••..

July 26,
1972

Obligations of states and political subdivisions:
Tax warrants and shart-t erm notes and bill s...

All other • .. • •.. .•••.. •.• • ••. • •. . .• •. .•.
O ther bond s, corporate stoc ks, and securities:
Ce rtiRcates represe nting participations in
fed oral ag ency loan s• ••. ... ... . ..... . ..

All other (includ ing corporate stocks)• •••..••.
Cash items in proc ess of coll ection • •• •. • ..•..•...
Rese rves w ith Fe deral Reserve Bank . .. . .•..... . .
Currenc y and coin . .. . . ..••.. . .••.•... . ......
Balances with bonks in th e Unit ed Stat es • . .. . ....
Balances with bon ks in foreign countri es •. ... .. . ..
O ther a sse ts (including Investments in sub sid iarie s
not consol idated) .. . ... .•.... .. . .. . .... • ...

----

14,026,7
11

=-

CONDITION STATISTICS OF ALL MEMBER BANKS

Eleventh Federal Reserve District

-

(Million dollars)

RESERVE CITY 8ANKS
Total rese rves held . .. . . ••••••••

With Fe deral Reserve Bank ••••
Curre nc y and coin • •• ........
Re quired rese rves •••• . • . ....•••
Excess rese rves••••. •. • .. • ..•• •
Bo rrowing s .• . . . ....•. • •• •• •••
Free rese rves •... • ... . . . . •• .. .

ALL MEMBER BANKS
Total reserves held . .... . ..... ..

W ith Federal Reserve 8onk ••..
Currenc y and coin . .. .... .. . .
Re quire d reserves.. .• ... . ... . . .
Excess rese rves . • . . . . .. .. .. .. . .
Borrowings . . . .. . . . . . . ....••••
Free rese rves •• ... . ... . .. .. .. •

13,482
2,370
4,356
1,375
285

29,075

28,786

1,739
10,657
11,383

1,658
10,549
11 ,265

23,779
1,929
1,402
1,965

23,472
1,851
1,512
1,951

Total deposits .. ... . . . .... ..... ... ... .
4 we eks ended
July 5, 1972

4 week. ended
Aug. 4, 1971

Borrowings . •. ... . . ... . .• .... . ..•..••.•
Oth er Habilitiese .•••. . ... . .. .•..• . .. . .. •
Total capita l accounts e • ..... . .. • . . ... ...

TOTAL LIABIlITIES AND CAPITAL
ACCOUNTse . . ................. .. .
911 ,366
846,390
64,976
917,076
-5,710
1,178
-6,888

893,070
833,047
60,023
910,116
-17,046
0
- 17,046

829,401
772,374
57,027
829,497
-96
29,41 1
-29,507

984,647
773,762
210,885
960,375
24,272
1,774
22,498

971,342
766,857
204,485
951,393
19,949
430
19,519

876,924
675,974
200,950
852,623
24,301
7,974
16,327

1,896,013
1,620,152
275,861
1,877,451
18,562
2,952
15,610

1,864,412
1,599,904
264,508
1,861,509
2,903
430
2,473

1,706,325
1,448,348
257,977
1,682,1 20
24,205
37,385
-13,180

CO'JNTRY BANKS
Total rese rves held . •.. ... ... ...
With Fe d eral Reserve Bank ....
Curre ncy a nd coin •••. . . ... . •
Require d reserves • ..• . .... . . ...
Excess rese rves . •. . .. ...... .. . .
Borrowings . . . . . ... . . . ..... . . •
free reserves . • . . ... . .• .. • .. . .

15,548
2,325
5,172
1,441
305
1,168
20
1,701
1,106

Time d eposits • . . ...... .. .. . ..•..• .....•

(Averages of dally figures. Thousand dollars)
4 weeks ende d
Aug. 2, 1972

15,719
2,287
5,225
1,507
309
1,242
13
1,655
1, 118

-------------------------------------------------------------------

ASSETS

Other demand de posits • ••• . • • • • • • •.• •• ••

Eleventh Federal Reserve District

Item

1971

De mand d eposits of bonks . ...... . . .. .. . .

RESERVE POSITIONS OF MEMBER BANKS

J~y2t

1972

TOTAL ASSETSe .. ........... .. . ..... .
LIABILITIES AN D CAPITAL ACCOUNTS

---- ---15,963,652 14,026,782

J~ e 2t

1972

loons and discounts, gross . .• . . . •..• . ..•..
U.S. Governm ent obligations. .. . . ........ .
Oth er securities••• . . . . . .. ... . . . . . . .. . .. •
Rese rves with Fe d era l Reserve Bank • ...... .
Ca sh in vault • • • •. •.. .. .•...•. . .••..•..•
8alances with bonks In th e United Stotes .. . .
Ba lances with banks In foroign countriesc •• . .
Cosh items in process of collection • • • • .. ••. .
Other assets 8 • • • •• •• •• ••• • ••• ••• •• •• •••

----

TOTAL ASSETS ...... . ..... .. . ........ ... 16,071,434

J~y2t
Ite m

1 ,2~~

1,444
929

-

~
1,7 15
9,669
9,609

20,993
1,544
1,098
1,880

e--Estlmated

CONDITION OF THE FEDERAL RESERVE BANK OF DALLAS
(Thou sand dollars)

Item

Aug . 23,
1972

July 26,
1972

-

Aug. 25,
1971

--------------------------------------------------------Total gold ce rtlAcate rese rv es. . . ... . . . .... . .
Discounts for memb er banks . ..... • . .•......
Oth er discounts and advances .. • . .. . . . . . . '"
U.S. Governm ent securities . . . ... . . . . ...... . .
Total earning a sse ts. .. . . ... . .. . . . .. . . ... . .
M e mber bank reserve d eposits • . ... ... . .....
fed eral Reserve notes in actua l circulation . .. . .

330,313
7,010

230,381
34,000

550,807

o

0
3,353,25 1
3,387,251
1,506,566
2,159,054

2959,80 4
2'963,80 4
1'561,886
2',076,952

3,240,709
3,247,719
1,569,344
2,169,330

4,OO~

------------------------------------------------------

BANK DEBITS, END-OF-MONTH DEPOSITS, AND DEPOSIT TURNOVER

SMSA's In Eleventh Federal Reserve District
(Dollar amounts In thousands, seasonally adjusted)
DEBITS TO DEMAND DEPOSIT ACCOUNTS'
DEMAN D DEPOSITS'

Percent change

July
1972
(Annuol·rote
basis)

Standard metro politan
statistical orca

ARIZONA, Tucson ••..•••.•..........•••• • ••.••. •••• .
LO UISIANA, Monroe • •........ . ••. . .• . ..• • . .•.......•
Shreve port • .... .... . .. • .... •.. .... .....•

NEW MEXICO, Roswell' ••• . .......•••...•.•.•.......•
TEXAS, Abilene •....••.........•.......•....... . •...
Amarillo ................•.....•......•.... . .

Austin .. . . ... .. ...••... .. ............•. . ... .
Beaumont-Port Arthur-Orange • . . ..... . .........•
Brownsvill e- Harling en- San Benito .•.. .....•..... . .

Bryon-Co" e g e Station ...... ... . . .. .. . ........ .

Corpus Christi ... ........ , ................. . ..
Corsicana 2 ••• • ••••••••••••••.•••••••••••••• •

Dallas ... .. . .... . . . . ...•.....• .• . •. . .•.....•
EI Paso . •...•. .•..••.... .• . • .. •...••.. .•..•.
Fort Worth . ......•....••.....•.•......•....•
Galveston-Texas City ...... . ...... . ........ ·•··
Houston •••. . " .... ••. ...••...... ....• •.• ... .
Loredo .•..... • •• .. . •• .. .••.. . . • .• • .... ... ..

Lubbock •.••....•••.•••••...•• . .••.•........
McAllen·Phorr·Edinb urg • •.. •.• . •.... •.• ••.• •.•.
Midland •••. ••... ...... .• .• • ...... ••.. . · • ·· .
Odessa • ..••......••......•.•• • •......••.. ,.

Son Ang elo • . • •..........•• •••• .. • • . .•. ·••• ••
Son Antonio •. .....••... . .. • ...•.... .• •...•• •
Sherman· Denison ••........•.. . .... • .•..... ••.
Texarkana (T exas·Arkansas) •. •. •• .. .•.. • . . ... ••

Tyler ••..•.... • ••.... . ....•..•..•.•.. . • · ••• •
Waco •...• • •••• .. •. .. • ..••. ••. .....•••....•

Wichita Fa lls••••..•......•.•... . •• •• . • •••.••.
Tota l-29 centers ..•....• . •..... • • . ••.••.. . • ....... •

Annual rate
of turnover

July 1972 from
June

1972

$9,425,26B
3,793,78B
II ,994,732
926,424
2,559,336
7,549,152
12,334,BOO
6,B32,944
2,346,600
1,315,164
7,353,768
517,668
146,743,668
9,687, 156
28,948,620
2,909,820
137,505,192
1,186,044
5,428,032
2,348,892
2,095,824
1,923,360
1,719,504
21,505,620
1,221,360
1,767,372
2,782,512
3,83 1,540
2,941,260

-3%
- II
-13
-6
-3
-10
I
-4
-6
0
I
-15
-5
2
- 12
-6
-3
4
0
-2
- 17
0
-I
-2
-6
- 10
I
-9
-2

$44 1,495,420

-5%

July
1971

7 months,
1972 from
1971

July 31,
1972

22%
12
9
-9
15
21
19
0
13
26
19
8
9
21
7
-2
18
16
4
31
-2
12
24
3
10
19
19
14
13

26%
19
IB
4
13
IB
IB
3
16
24
15
0
II
15
8
0
22
9
13
30
7
II
13
8
10
15
13
16
15

$313,026
11 2,738
314,76B
45,339
I 26,9B5
190,692
446,OB5
273,297
96,699
53,504
263,174
37,080
2,755,582
302,847
810,78 1
126,460
3,247,274
49,527
192,976
137,660
150,800
105,596
78,141
835,3 12
76,083
88,765
120,754
151,850
133,014

12%

15%

July
1972

July
197 1

30.0
34.7
39.B
21.2
20.7
39.6
26.6
25.2
24.0
24.5
27.6
14.4
53.8
31.4
36.5
23.7
43 .8
23.7
28.6
17.1
14.0
18.2
22.0
25.9
16.2
20.3
23.6
26. 1
22. 1

32.0
39.3
46.6
23.4
21.8
43.0
26.9
25.9
24.8
24.7
27.0
17.7
55.5
30.7
41.9
25.5
45.7
22 .6
28.7
17.0
17.0
17.9
21.9
26.5
17.2
23. 1
23 .8
29.3
22.2

28.0
34.6
40.6
24.2
20.9
37.1
2B.7
26.7
24.4
23.0
22.2
14.4
57.2
31.3
38.4
25.9
41.9
22.6
29.7
16.4
15.4
17.1
18.4
28.6
16.0
19.7
22.1
25.1
21.4

38.5

$11,636,809

1972

40.4

38.9

June

1. De posits of Individuals, partnerships, and corporations and of states and political subdivisions
2. County basis

DAILY AVERAGE PRODUCTION OF CRUDE OIL
(Thousand barrels)
Percent change from

-

BUILDING PERMITS

July
1972

Area

VA LUATION (Dollar amo unts in thousan ds'
Percent change

FOUR SOUTHWESTERN
STATES . . . . •••• • . •• . • • . •
Louisiana .••.••• • .• •• ••••
New Mexico •.•.• • .•. ••• .

July 1972

Area

July
1972

July
1972

5,488

$17,476

ARIZONA
Tucson • . ••...•

745

Texas ••..•.• • .•. • • •••• •
7 months,

1972

7 mos.

Oklahoma • ••.• • • •• . •••••

from

NUMBER
7 mos.

June

1972

1972

$123,637

July
1971

G ulf Coo.t ••...•••••.•

1972 from
1971

East Texo. (pro per) ••..•

-5% 238%

113%

L
OUISIANA
Monroe-West
Monroe • ..••

Shreveport •• . •
TEXAS
Abilene • • .. .. .
Amarillo • • •..•
Austin ••••...•
Bocumont • ••. •
Brownsville ••..
Corpus Christi ••

Dallas ••...••.
Denison •• • .. ••

EI Po.o . ••••••
Fort Worth •..•
Ga lveston •.. . •
Houston • • •..•.

Laredo ••..•..
LUbbock • •. •. .
Midland •••. . •
O dessa • ..••. .

Port Arthur .•..
~an Angelo •• • .
an Antonio .• •

~hermon •••..•

W~~~~~~~ '. :::

Wichita Fall • • .•

-

Tota l_2 6 citie •••.

55
459

757
3,288

793
3,960

17,278
35,904

-23
-29

14
-39

41
2

57
19 1
590
233
95
374
1,493
47
568
361
60
2,928
39
181
106
93
85
58
1,585
46
56
196
68

481
1,239
3,899
1,499
744
2,863
11,889
241
4,036
2,995
511
26,880
320
1,346
693
639
637
493
10,703
349
367
1,602
591

1,778
4,346
17,518
1,702
1,532
4,785
18,025
145
13,553
10,545
233
65,060
244
4,069
659
1,250
704
943
13,086
532
380
4,312
1,01 1

10,711
17,760
148,868
17,281
8,507
39,334
267,130
1,963
11 2,849
49,125
7,648
391,584
9,654
33,412
11,554
18,225
3,866
4,828
131,845
4,800
5,047
22, 191
8,617

91
94
-44
-49
21
42
-72
-60
-18
46
-51
8
- 94
-41
-7
84
91
48
-39
72
- 19
- I
-37

144
52
24
-63
19
17
- 12
-53
88
29
-65
36
-67
9
32
122
60
-60
20
104
- 13
176
-33

42
4
63
60
89
4
63
-6
66
-34
-7
0
78
- 14
55
280
6
-40
82
21
-17
37
-32

---10,769 84,550

-$188,641 $ 1,503,618
---

-27%

West Texas •• • • • •• . ••.
Pan handle •.•• . ••. •.• ..
Rest of state • •• . ..• . •. •

28%

29%

UNITED STATES •• •••• •• •• ••

1972

Jul y
1971r

7,150.5
2,546.6
309.8
567.5
3,726.6
771.3
1,798.1
258.8
73.0
825.4
9,727.0

7,251.1
2,605.0
310.0
572.3
3,763.8
739.5
1,856.8
244.8
74.9
847.8
9,871.1

6,838.8
2,632.6
325.4
596.4
3,284.4
640.4
1,628.0
183.4
70.0
762.6
9,524.4

June

June

1972
-1.4%
-2.2
- .1
- .8
-1.0
4.3
- 3.2
5.7
-2.5
-2.6

-1.5%

Jul y
1971
4.6%
-3.3
-4.8
-4.9
13.5
20.4
10.5
41.1
4.3
8.2
2.1%

r-Revlsed
SOURCES : American Petro leum Institute
U.S. Bureau of Mines
Federal Reserve Bank of Dall as

GROSS DEMAND AND TIME DEPOSITS OF MEMBER BANKS

Eleventh Federal Reserve District
(Averages of dally figures . Millio n doll ars)
GROSS DEMAN D DEPOSITS
Da te

Tota l

city bonks

Country
banks

1970, July • • .....
197" July •.• ••.•
1972: February .••
March .•..•
April. ... . •
May .• •.• .

10,4 12
II ,507
11,983
12,11 8
12,407
12,268
12,320
12,468

4,782
5,314
5,419
5,563
5,676
5,652
5,689
5,708

5,630
6,193
6,564
6,555
6,731
6,61 6
6,63 1
6,760

Reserve

June . ••.. .

July •..••.•

TIME DEPOSITS
Total

city ba nks

Country
bank.

7,5 11
9,588
10,864
10,978
10,938
11,075
11 ,233
11,304

2,722
3,696
4,249
4,255
4, 180
4,262
4,323
4,365

4,789
5,892
6,6 15
6,723
6,758
6,8 13
6,9 10
6,939

Reserve

INDUSTRIAL PRODUCTION
(Se a sonally adju s ted Indexes, 1967

VALUE OF CONSTRUCTION CONTRACTS

= 100)

(Million doll a rs)

July
1972p

Area and type of index

June
1972

May
1972

July
1971

133 .3
134 .3
142 .3
12B.5
124.0
159.7

134.1
134.7
144 .7
127.4
125.9
160.7

130.5r
131.5r
143.6
122 .Br
120.3r
160.1r

120.B
122.2
131.6
115.3
II1.B
143.1

113.6
112.6
107.0
12Q.6
109.1
141.2

113.3
112.1
106.0
121.0
10B.4
141.2

113.2r
112 .2r
106.3r
120.6r
107.4r
141.4r

106.B
105.B
100.3
113.B
105.6
136.2

January-July
Area and type

TEXAS
Totol industrial production •.••.•
Manufacturing •• • • • ••••••••••••

Durable •. . .........•.. . ..•..
Nondurable • •• •••• • • • ..•• • • • •
Mining • • ••• • • • •••••• •• • ••••• ••

Utilities ••••••• • •••• •• •••••• •• •
UNITED STATES
Total industrial production ••••• .
Manufacturing • ••• •••••••••• • ••

Durable •.....• . ..••• . . ••••••
Nondurable •• .•.•••• . • .......
Mining ................. . ... . ..
Utilities •• ••• • ••••• •• • •.•••••••

p-Prellmlnary
r-Revlsed
SOURCES : Board of Governors of the Federal Reserve System
Federal Reserve Bank of Dallas

FIVE SOUTHWESTERN
STATESI .......... . . .. ..
Residential building .... •..
Nonre sid e ntial building • ••.
Nonbuilding construction • •••
UNITED STATES ..•• . ••. . . . .
Res id e ntial building . •• ••• •
Nonresidential building ••••

Nonbuilding construction •• • •

July
1972
817
468
219
129
8,067
3,B64
2,461
1,741

-

1972

May
1972

1972

1971r

1,076
567
338
171
8,478
4,375
2,447
1,655

1,256
5 18
343
396
9,098
4,428
2,908
1,762

6,766
3,337
1,838
1,591
52,686
25,560
15,616
11,5 10

5,274
2,601
1,650
1,024
46,634
19,331
15,172
12,131

Jun e

1 . Arizona, Louisiana, New Mexico, Oklahoma, and Texas
r- Re vls e d
NOTE : De tail s m a y not a dd to tot a ls be c a use of rounding .
SOURCE: F. W. Dodge Division, McGraW-Hili Information Systems Company

LABOR FORCE, EMPLOYMENT, AND UNEMPLOYMENT
Five Southwestern States 1

-

(Season a lly a djuste d)

(Thousand bushels)

Item
TEXAS

FIVE SOUTHWESTERN STATESI

1972,

Cotton 2 •

••••••••

Corn •••••••••••

Winte r wheat •..•
Oats . • . • . •••...
Barle y .. . ... .. ..
Rye ............
Rice' ... • . . .•• • .
Sorghum groin •••
Flax seed •• • • • • ••

Hay· ...........

Peanuts s ••••••••

rish potatoes3 ••••
Sweet patotoes s,.

1971

1970

1972,
estimated
Aug. 1

1971

1970

3,631
35,000
44,000
9,000
1,560
630
22,464
336,000
165
3,944
434,720
3,529
1,063

2,614
43,056
31,416
5,994
1,320
378
22,932
303,004
70
4,114
366,795
3,299
788

3,209r
33,232r
54,408
29,032
4,224
566
21,015r
329,616
1,125
4,037
429,930
4,593
1,040

5,490
45,469
151,998
15,345
18,616
1,790
42,861
393,915
165
9,990
662,560
6,785
4,388

4,053
53,925
117,715
11,574
23,138
1, 15B
42,768
370,197
70
10,220
602,315
6,810
3,763

4,556r
44,395r
169,069r
38,304
33,954
1,502
41,412r
386,051
1,125
9,811
640,196
8,096r
4,820r

1. Arizona, Louisiana, Ne w Mexico, Oklahoma, and Texas
2 . Thousand bales
3. Thousand hundredweight
4 . Thousand tons
5 . Thousand pounds
r- Revised
SOURCE : U.S. Department of Agriculture

prices for newly discovered gas.
The change, made mainly to spur
exploration, still leaves prices for
new domestic gas below prices of
imported liquefied gas and synthetic gas.
In line with the continuing high
demands for domestic crude, all
producing states of the Eleventh
District left their oil allowables for
September at the highest practical
levels. In Texas, for example, where

Civilian lohor force ••••.•••.
Totol e mployment ... ....... .
Total unemployment •• •• • • •• •

Aug. 1

estimated

Crop

Percent change
July 1972 fr~

Thousand s of persons

CROP PRODUCTION

Unemployment rat e •••••••••
Total nonagricultural wage

and salary e mployment ••••
Manufacturing • ••• • • ••• • •

Durable .... . . .. . . .. . ..
Nondurabl e ...........
Nonmanufacturing •• • • ••••
Mining ••• •• •••• • • •••••

Construction •••••••• • • •
Transportation and

public utilities •••••••.
Trad e . . •. . .. ...• . .. . .
finance ••..•• •. ..... • .
Service •••••. '" ..•.•.
Governm ent •••• • ••• • • •

July
1972p

1972

July
1971r

8,475.7
8,088.3
387.3
4.6%

8,414.0
8,055.1
358.9
4.3%

8,257.4
7,860.6
396.7
4.8%

6,589.0
1,145.0
620.7
524.2
5,444.1
225.6
430.7

6,571.2
1,149.7
622.9
526.8
5,421.5
225.9
427.9

6,35 1.6
1,120.1
605.3
5 14.8
5,231.5
214.7
396.7

454.6
1,567.9
353.4
1,067.2
1,344.7

453.0
1,558.8
351.9
1,065.2
1,338.8

446.1
1,505.9
336.2
1,026.8
1,305.1

Jun e

1 . Arizona, Louisiana , New Mexico, Oklahoma, and Texas
2 . Actual change
p-Prellmlnary
r-R e vls e d
NOTE : Details may not add to totals because of rounding.
SOURCES : State employment a g e ncies
Federal Reserve Bank of Dallas (seasonal adjustment)

allowables have been set at their
practical maximums for six months,
rates were left at 100 percent of
maximum efficient production in all
but three fields: the East Texas
field, where the allowable remained
at 86 percent; the Kelly-Snyder
field, still 76 percent; and the Tom
O'Connor field, where the allowable
was lowered to 70 percent.
To provide more flexibility under
the current condition of high de-

Jun e

1972

July
1971

0.7% 2.6%
2.9
.4
7.9 _2.4
'_.2
' .3
.3
-.4
-.4
-.5
.4
- .1
.7
.4
.6
.4
.2
.4%

3.7
2.2
2.5
1.8
4.1
5.1
8.6
1.9
4.1
5.1
3.9%
3.0

-

mand for crude, New Mexico has .
revised its system of regulating 011
production. Proration schedules .
will be issued every four months Instead of every other month, as has
been the case, provided wells are
operating at capacity. Also, greater
attention will be given to setting
allowables for individual pools. In
the past, some New Mexico production has been held back becaUse
of conservation problems.