According to Federal Reserve statistics, bank and thrift savings account assets, including money market deposit accounts (MMDAs), broke above the $4 trillion level for the first time ever at the end of March 2008. The Fed's H.6. "Money Stock Measures" shows bank savings totaling $4.018 trillion as of March 31, a gain of $88.6 for the month and $118.1 billion year-to-date (3.0%). Over the past 12 months, bank MMDAs and savings have grown by $241.3 billion, or 6.4%.

Prior to September 2007, when the Federal Reserve began a series of interest rate reductions in order to combat the effects of subprime mortgage-related turmoil in the money markets, the spread between money market mutual funds and bank savings deposit rates had peaked at a record 4.0%. While assets continued into bank savings, money market mutual funds received the lion's share of new cash assets over the past several years, particularly since mid-2006. Though the differential is shrinking along with overall short-term interest rates, the gap remains substantial. (Subscribers should see the bottom table on page 2 of our April Money Fund Intelligence.)

While both "cash" sectors are undoubtedly seeing large tax-payment related outflows in the second half of April, we expect money market mutual fund assets, which totaled $3.506 trillion at the end of March, to overtake bank savings and MMDA totals in late 2008 or 2009. Given current growth rates -- money fund assets have increased by 11.3% ($354.9 billion) YTD and by 42.8% (1.049 trillion) over 1-year -- this could happen by fall. But inflows into money funds will undoubtedly slow their torrid pace as the Fed halts, and eventually reverses, its recent series of rate cuts, and as the massive flight-to-quality eventually subsides.

Currency, demand deposits and other checkable deposits (checking accounts) total $1.375 trillion, so total "cash", including money market funds, MMDA, and savings accounts in the economy adds up to a massive $8.899 trillion. Small Time Deposits (CDs) would add another $1.216 trillion, bringing the total to $10,115 trillion.

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