Do monetary statistics take account of securitisation (meta, 1 graph)?

According to Paul Krugman economic statistics are ‘a particular boring kind of science fiction’. And after this blogpost even David Ruccio and Lars Syll or the staunchest Austrian might agree with him, for once. It’s about monetary statistics – but let start to state that I do not agree with Paul. In the end, the monetary statistics data are based upon traceable individual contracts and individual behaviour – this in stark contrast to main stream models, which just assume whatever is convenient and do not recognize the importance of proper definitions, apt operationalizations and an economics based upon actual behaviour. See, for an explicit example, this David Glasner post, including the comments of Nick Rowe: “let’s assume, let’s imagine, using precise definitions doesn’t matter”. Yawn. And none of these two bloggers seem to be even remotely aware of the role of debt and individual behaviour… talk about fiction!

To the point:

1. Monetary statistics are based upon the ‘loan create deposits’ idea. Yes, the core concept of monetary statistics is the idea that money is born from debt.
2. Some banks (the Monetary Financial Institutions,  MFI’s) have the remarkable right to create legal tender and (can) do so whenever somebody borrows (mortgages, overdraft, whatever). Aside: in my view this makes the borrower the active participant, the main role of the banks (though they seem to have forgotten this for some time) is to restrict borrowing to sound projects!
3. Central banks, like the ECB, basically estimate money(growth) by looking at the amount of loans on the (monthly) balance sheets of the MFI’s (shifts between posts on the liability side also do play a role).
4. However, MFI’s have sold quite some amount of (securitized) loans to Special Purpose Vehicles, a kind of banks without the right to create legal tender (though they do create a kind of interbank monies). This means that comparing (monthly) balance sheets leads to an understatement of money- and debtcreation. This is no trivial amount of money, as shown by the example of the Netherlands (at present I do not have data on other countries, it’s about 250 billion Euro)

4. Do monetary statistics take account of this? As far as I can tell (and there comes the science fiction) the ECB statistics only do so in a systematical way since June 2010 (and here comes the SF):

(link, see pp. 128-129):

In addition to the adjustment of financial transactions, the outstanding amounts of loans to other euro area residents were also adjusted for the stock of securitised (and derecognised) loans, whenever this information was reported. Growth rates adjusted for securitisation and loan sales were then derived on the basis of the index series in formula [4.3.1], computed using adjusted outstanding amounts and transactions. Under Article 5 of Regulation ECB/2008/32, the collection of loan securitisation data has been fully harmonised. The data are complemented by FVC (i.e. SPV’s, M.K.) balance sheet statistics collected from euro area FVCs under Regulation ECB/2008/30. Accordingly, MFIs report the monthly net flow of loan securitisations and other loan transfers, broken down by sector of borrower, distinguishing between securitised loans that are derecognised from the balance sheet of the originating MFI and non-derecognised securitised loans. Section 2.3 explains the reporting framework in detail. In line with the new data requirements, the ECB derives a flow adjustment for euro area MFI loans to other euro area residents, non-financial corporations and households using the newly available figures from June 2010. However, it is not possible to perform an analogous adjustment of the outstanding amounts, since no data on outstanding amounts of derecognised (securitised) loans are collected under Regulations ECB/2008/32 or ECB/2008/30. Similarly, no data on repayments of securitised loans that are derecognised are collected under Regulation ECB/2008/32. As a consequence, growth rates are derived for reference periods from June 2010 onwards on the basis of the index series in formula [4.3.1], using transactions data adjusted for disposals and acquisitions of loans, but not adjusted for repayments and outstanding amounts of securitised and derecognised loans.

Need some spacecake?