Funds have flowed internationally from savers to borrowers, who generally tend to be entrepreneurs and others in business who need capital to build businesses and serve customers, both in their home countries and overseas. This international flow moves capital toward its most productive use, in principle, from the higher saving industrialized world to the high return, capital-short developing nations.
Annual M3 growth, although declining somewhat in December, remained very vigorous at 11.5%, whereas M1 growth continues to moderate, reflecting the dampening impact of higher interest rates. Broad money dynamics in recent quarters are likely to have been influenced by a number of temporary factors, notably the flattening of the yield curve, which may have supported some substitution into monetary assets.