FROM A PRACTICAL POINT OF VIEW, WHAT ARE THE DATA LIMITATIONS FOR DETERMINING THE VALUES OF NEW MONETARY AGGREGATES?
The data collection of balance-sheet information is currently at stake in the USA – where the only available data are the IRS files for corporate taxes and the SEC files for all listed companies. In Europe, companies are required to file, and deemed compliant when they do so, with the Registrar of Commerce. What information is currently legally available, how it is currently dealt with and by whom are questions to be explored further – however, such data is increasingly available in Europe, given data exchange standards defined by various taxation administrations.
What Information Will These New Aggregates Yield?
First and foremost, one impact of these new monetary aggregates would be to improve the existing statistical base: at present, both the Bureau of Economic Analysis[1] and Eurostat[2] issue “net worth” schedules by institutional sector (Households, Non-Financial Corporations, MFIs, Financial Intermediaries, Other Financial Vehicles, Governments, Insurance and major Foreign Corporate Entities). European statistics data repositories rely mostly on data streams fed by Europe's central banks. This data is categorized based on asset type, distinguishing tangible assets from both financial assets and liabilities – in doing so, this helps determine net financial worth. The requisite financial assets are classified only in terms of their legal nature and may be entered in a separate line intended for receivables that are not instruments. This European set-up complies with intrinsic European regulations, and its system of operation is quite interesting as it converges conceptually with our own views. For instance, it disregards gold, as well as special drawing rights (SDR), which, by definition, are not designated as liabilities. As we have already noted, the above set-up disregards any changes in value that are not generated by “real transactions”. In doing so, the results generated may be compared accurately with GDR
Nevertheless, all papers[3] complain about insufficient data. As they are compiled from lower-level sources of collection, existing statistics are based on accounting classification rules and cannot be linked to exchanges. As a result, such statistics will not show the causes of possible shocks – and even obvious ones (e.g., the sub-prime crisis) resulting from the decline in value of real estate as transmitted through instability in financial instruments. This weakness in present data systems, which fails to illuminate major crisis trends, reflects the fact that inherent links are basically not macroeconomic. Rather, they are impacted by market volatility and the speed of monetary rotation (monetary velocity), a phenomenon that differs from one financial market and one instrument to the next, in part depending on government-associated guarantees. Such statistics also largely miss the impact and status of foreign instruments holders, and their ultimate beneficiaries – who cannot be tracked and followed from one jurisdiction to another without specific transnational agreements.
