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Adjusted Monetary Base: Up, Up And Away

Tyler Durden's picture


Shortly Zero Hedge will present our quarterly analysis of the liabilities held by the shadow banking system. It's quite a doozy, and cements our belief that whether immediately following or shortly after June 30 (a day, a week, a month), the Fed will have no choice but to proceed with further monetization of public debt issuance, as the private sector debt retrenchment continues at truly alarming levels, leaving just one source of debt money available - the US central bank itself. And with the Fed's desire to stimulate inflationary expectations, it will be forced to do what it is doing precisely as shown below. In the last fortnight period, the Adjusted Monetary Base increased by the second biggest amount in the past year, or $80 billion, following the previous increase of $142 billion as of February 23, or a $222 billion increase in a month. This is due to a surge in excess reserves following the winddown of the SFP program which in the past week increased by $82.6 billion (full Fed Balance sheet breakdown to follow). We continue to expect that Excess Reserves will hit $1.7 trillion by July, or over $300 billion higher from the current level of $1.380 trillion. In the meantime, observe what happens when the Fed goes hog wild with inflationary expectations. A few more days like today in the S&P, and expect Jon Hilsenrath to start the QE3 leaks. And never forget - to the Fed, the Economy and the Russell 2000 are equivalent.

Source: St Louis Fed


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Thu, 03/10/2011 - 20:45 | 1038844 DoctoRx
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"'Shorty' Zero Hedge" . . .  ?!! WTF?

A Freudian typo?

Thu, 03/10/2011 - 21:58 | 1039092 morkov
morkov's picture

80 Bil is the weekly wages for about 40 milion americans, no? WTF?!

Thu, 03/10/2011 - 20:47 | 1038856 BrianOFlanagan
BrianOFlanagan's picture

all to cover JPM's silver losses no doubt

Thu, 03/10/2011 - 20:48 | 1038857 Rainman
Rainman's picture

Shake out weak hands + rumors on QE3 = BTFD

Dip to where is the only question left. 

Thu, 03/10/2011 - 20:57 | 1038884 ml8ml8
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The 61.8% retrace of the S&P 500 at 925 (see, e.g., March 31, 1938.)

Thu, 03/10/2011 - 20:59 | 1038890 chet
chet's picture

Concur.  But I think it will take a genuine correction to justify QE3.  Need to make people squeal to get the political cover.  

Is this it?  Tomorrow and Monday will be big days to watch.

Thu, 03/10/2011 - 20:56 | 1038882 reader2010
reader2010's picture

Welcome to Weimar Amerikka.

Thu, 03/10/2011 - 21:00 | 1038900 Misean
Misean's picture

While I think that that increase is merely an accounting change, it sure spooks the bejezus out of me.

Thu, 03/10/2011 - 21:05 | 1038907 treasurefish
treasurefish's picture

OMG!  This chart isn't on the front page of the Wall Street Journal?  WTF!!!


END THE FED!  We can do it!

Thu, 03/10/2011 - 21:07 | 1038915 gwar5
gwar5's picture

Thanks, good stuff. The QE 3 vs no QE 3 question looms.

More evidence QE 3 will happen and the negative QE 3 talk is a head fake. 

Thu, 03/10/2011 - 21:10 | 1038931 EscapeKey
EscapeKey's picture

How does this differ to the launch of QE2?

Fri, 03/11/2011 - 00:23 | 1039460 slewie the pi-rat
slewie the pi-rat's picture


tyler sez: shortly after June 30 (a day, a week, a month), the Fed will have no choice but to proceed with further monetization of public debt issuance

slewie sez:  duh.

i don't know how the day is going on yer side of the pond, EK, but here, within a few trading hours of the zeroHedge moronic shitheads wondering how to play the vix, which might go ape-shit, the freaking vix, unless i miss my guess, went ape-shit. 

this little "deflationary twinge", today, may be just a mild precursor of our world-class banksters' ability to "use excess liquidity to play the downside to the freaking hilt". 

any bets?

Thu, 03/10/2011 - 21:18 | 1038954 plocequ1
plocequ1's picture

It will happen.

Thu, 03/10/2011 - 21:07 | 1038920 99er
99er's picture

RUT Weekly

Wolfe Wave target of 575.

Thu, 03/10/2011 - 21:16 | 1038945 NOTW777
NOTW777's picture

dont let'em pry your gold and silver from your hands

Thu, 03/10/2011 - 21:15 | 1038947 Kina
Kina's picture

Dow 360,000

Gold = infinity

Thu, 03/10/2011 - 21:17 | 1038949 Seasmoke
Seasmoke's picture

what goes up, must come down ?

Thu, 03/10/2011 - 21:20 | 1038968 Judge Judy Scheinlok
Judge Judy Scheinlok's picture

"A few more days like today in the S&P, and expect Jon Hilsenrath to start the QE3 leaks."

Or maybe they'll shake it up a bit. Have Gross tell everybody that he's all out of treasuries (LOL!, yea right), and poised to capitalize on the equity rocket ship ride to the moon.

F'ing sheeple.

Fri, 03/11/2011 - 00:33 | 1039485 slewie the pi-rat
slewie the pi-rat's picture

show us yer titz, J.J. !

Thu, 03/10/2011 - 21:20 | 1038971 davepowers
davepowers's picture

zounds. reserves up $300bn in five weeks. 

Thu, 03/10/2011 - 21:32 | 1039018 Miss Expectations
Miss Expectations's picture


Thu, 03/10/2011 - 21:22 | 1038972 clymer
clymer's picture

b b b.. but pimco's long dollars, and martenson says big dip coming, and robo loves stocks and the ber-nank says to trust lil' timmy?



*o'bammy gimme a hug*

Thu, 03/10/2011 - 21:44 | 1039050 Paul Krugman
Paul Krugman's picture

I'm not sure why you are hot and bothered by excess reserves. It would be much worse if the excess reserves were stable or falling. It would corroborate the evidence you present every week of the flip that bond nonsense. If the Fed buys the bonds from PD and they turn around and buy treasuries that is how the money leaks into the system. 


In fact that is one way the monetization of deficits can continue after QE2 while claiming that there is no QE3. I would watch that this is the way they fund deficits after QE2. They will just force the banks to use the excess reserves to purchase treasuries after June. This is a hidden way to get those reserves into the system without announcing the big FAIL that is QE2.

Thu, 03/10/2011 - 23:11 | 1039273 eddiebe
eddiebe's picture

seems to me that as long as banks can get money from the fed @ .5% in these massive quantities and  get a cool 3% or more from the gov. without risk, why would they lend it out to the private sector? Then if /when interest rates start to rise and the banks get in trouble they get bailed out or just get to mark to model.

 This is a failed experiment in the making.

Thu, 03/10/2011 - 21:53 | 1039080 tekhneek
tekhneek's picture

So this is Bearish for precious metals then, got it... Jackasses.

Quit saying "Sheeple" if you don't know what the fuck you're talking about. Jesus H. Christ people.

Thu, 03/10/2011 - 22:59 | 1039242 eddiebe
eddiebe's picture


Thu, 03/10/2011 - 21:57 | 1039090 tekhneek
tekhneek's picture

Can we a chart covering the past 10 years? Shadowstats or somewhere? That might make this intrayear chart look like spitting in the ocean.

Fri, 03/11/2011 - 00:37 | 1039506 slewie the pi-rat
slewie the pi-rat's picture


blythe! check out my log scale!

Thu, 03/10/2011 - 21:59 | 1039095 Dr. Porkchop
Dr. Porkchop's picture

Look at that boner.

I have that in the morning too, but I quickly cover my shorts until I exit the market.

Thu, 03/10/2011 - 22:27 | 1039165 Lord Welligton
Lord Welligton's picture

"Adjusted Monetary Base: Up, Up And Away"

In my beautiful balloon.


Thu, 03/10/2011 - 22:57 | 1039236 flow5
flow5's picture

No one on this blog understands money & central banking.  zipo, nada

Thu, 03/10/2011 - 23:02 | 1039246 Paul Krugman
Paul Krugman's picture

Why don't you enlighten us flowfag.

Thu, 03/10/2011 - 23:59 | 1039401 Hammer Down
Hammer Down's picture

That is probably the worst comment I've seen on ZH.  If you're going to throw a bomb like that, at least have the balls to explain yourself.  I mostly lurk around here - primarily because the comments and posters you're junking are spot on and they always beat me to the punch.  Damn near all the non-troll comments, even one liners, are more insightful and knowledgeable than anything you'll find from the so-called experts (shills).

Fri, 03/11/2011 - 01:19 | 1039619 Dr Hackenbush
Dr Hackenbush's picture

The decrease in purchasing power incurred by holders of money due to inflation imparts gains to the issuers of money.

There, how'd I do?  

Fri, 03/11/2011 - 01:51 | 1039689 Dr. Porkchop
Dr. Porkchop's picture

I understand trolling, and that one is called a drive by. Total douchebag move.

Thu, 03/10/2011 - 23:10 | 1039267 6 String
6 String's picture

QE3 will not transpire or leaks of it until the shit really starts hitting the fan. Bernake wants to kick congress in the nuts for being tarred and featherd. The man's gotta make his point and the only way to do it now is let the fucker unravel for awhile, until the next Jackson Hole moment.

JP Morgan is ramping up its silver short position. Bill Gross is going into cash and non-dollar denominated bonds because he knows with first hand knowledge QE3 will not start right after June 30.

Tepper doesn't think they'll be a QE3. Buffett is on public record saying he didn't think we should have done QE2. The world is literally on fire with our debased dollars, and the Bernak is hearing plenty for it. China is pissed and is moving ahead with trades getting settled in Yuan.

The Bernak will not QE3 until he's made his point,  QE's can NEVER really stop now....



Thu, 03/10/2011 - 23:23 | 1039306 Paul Krugman
Paul Krugman's picture

Thats kind of my point. They have to monetize deficits or we get higher rates. There has been enough blow back that I'm not sure they can crow about implementing QE3. Therefore, they are going to have to monetize while hiding the size. The only way I know to do this is to get the banks to do it behind the scenes. Lord knows they are good at lying to the public.

Fri, 03/11/2011 - 00:47 | 1039537 KickIce
KickIce's picture

Bingo, and the Tea Party will take it in the nuts for trying to be fiscally responsible.

Fri, 03/11/2011 - 09:42 | 1040205 falak pema
falak pema's picture

That or the war...that Adriano Celento or whoever, king soothsayer, says is around the corner.

Fri, 03/11/2011 - 11:53 | 1040583 GoinFawr
GoinFawr's picture

Geraldo Cilantro?

(I kid GC: keep hitting them where it hertz)

Thu, 03/10/2011 - 23:23 | 1039304 tony bonn
tony bonn's picture

this is the proverbial hand writing on the wall...the inflationary flood gates are opening like tsunami....god almighty help us.

Thu, 03/10/2011 - 23:29 | 1039321 lsbumblebee
lsbumblebee's picture

Maybe if we print more calendars...

Fri, 03/11/2011 - 09:45 | 1040211 falak pema
falak pema's picture

Of blond bimbos, the kind that's given Benocide the mega boner portrayed on the chart above? Triple portions coming up...this autumn!

Thu, 03/10/2011 - 23:49 | 1039384 baldtaco
baldtaco's picture

There will be a head fake with QE3. The fed will say no QE3 then the banks

will start to lose money and Presto QE3. How long until the sheeple wake up is anyones guess.

.223 Au H2o grub

Good luck

Thu, 03/10/2011 - 23:51 | 1039387 bob_dabolina
bob_dabolina's picture

Russell the love muscle

Love that guy

Thu, 03/10/2011 - 23:53 | 1039389 Hammer Down
Hammer Down's picture

Pushing on a string perhaps for now - unfortunately expectations are not beholden to velocity

Fri, 03/11/2011 - 00:05 | 1039419 TruthInSunshine
TruthInSunshine's picture

First, this expansion of the monetary base literally means nothing, absent an accurate analysis of the further markdowns in asset class valuations to come, and also existing liabilities owed but not satisfied (executory contract aggregate debt).

Also, it fails to take into account that for all practical purposes banks, financials and other entities have marked current assets they're holding up to unrealisticly high levels, which will further draw upon any of their reserve liquidity when their days of reckoning arrive (and they will arrive).

One timely and relevant revelation was just issued today, when Bank of America proclaimed that 50% of all mortgages it holds or is servicing are 'underwater.' That's just one bank (granted, a large one). And wouldn't you all agree that Bank of America is UNDERSTATING how much the mortgages are underwater by (lest it be deemed insolvent, and crucify itself)?

That's just one bank, talking of the residential sector of MBS. What about commercial, industrial, office? What about CDS? What about the value of consumer or corporate paper holdings?

There is a huge 'short the USD' herd in full stampede right now, and it seems like these same herd members simply can't or won't acknowledge that while there's a digital build in U.S. fiat (which pales in comparison to other nations' efforts to increase their monetary bases, BTW, including the 'miraculous' China), there's a massive aggregate liability base of deeply impaired assets still sitting out there like an unstable thermonuclear weapons cache.

If The Bernank wants sustainable inflation (I'm not speaking of inducing commodity and other asset class bubbles intermediately or over the short term, which has clearly happened - but is going to see a violent reversal), he's likely destined to fail.

The die have already been cast, and Bernanke sevened out.

Fri, 03/11/2011 - 00:34 | 1039490 bob_dabolina
bob_dabolina's picture

Is Europe weaker than the U.S?

Fri, 03/11/2011 - 00:59 | 1039514 TruthInSunshine
TruthInSunshine's picture

I believe Europe is much weaker than the U.S.

Germany is holding the EU together, as it is, and Merkel is endangering her own political fortunes in doing so (which is why she had to 'get tough' or pretend to do so with Greece & Spain today).

The Eurozone is littered with decaying carcasses; PIIGS+UK.

Italy, Spain, Ireland and Portugal all easily have real unemployment rates (not underemployment rates, but pure unemployment rates) of well above 20%. Ireland is around 25% as is Italy. Use U6-type encompassing metrics, and I'd bet they're all pushing 35%.

Fri, 03/11/2011 - 03:02 | 1039775 slewie the pi-rat
slewie the pi-rat's picture

TruthInSunshine @ #1039419:  The die have already been cast, and Bernanke sevened out.

i think it shld be dice.  one die; two dice. 

here's some BofA news from march 8: Bank of America: Yes, The Dividend Is Coming - Deal Journal - WSJ

so, that needs a grain or 2 of salt, eh?

here's what is paying a div @ BofA---their preferred which is paying 8.19%, at today's price.  i don't know how "safe" this div is, and i defy anyone to figure it out from the published gobbledy-gook given the imprimatur (aka the "kiss of death") from the SEC that nothing is real.  especially in "banking" post bail-out, post crisis, post glass-steagall.  here:  Bank of America Corp CP PFD , BMLPRQ Stock Quote - (NASDAQ) BMLPRQ, Bank of America Corp CP PFD Stock Price

here is the npr (pardonnez moi) fairly fair analysis of BofA's "rescue" of countrywide, given in real time, 26 months ago: Bank of America Buys Countrywide : NPR

here is the more-digested wiki history of this amazing tale: Bank of America Home Loans - Wikipedia, the free encyclopedia

if you take the time to read the wiki history of Countrywide Financial carefully, you will know exactly what glass-steagall was designed to protect against. 

so, on july 1, 2008, BofA completed its "purchase" of countrywide.  then, BofA started getting a whiff of what it had "bought", and had that WTF! moment, sent up a trial balloon or three about the "material adverse change" clause (MAC) which resulted in hanky panky threatening to replace BofA top dog Lewis and the whole fuking Board, too.  BofA toed the line, leading to this shit, here:  Did Bernanke and Paulson Commit Bank Fraud?

and, about 4 months after that BofA mole whacking, poor, innocent hanky panky is getting tagged with improperly replacing the CEO of AIG with (gasp) a goldman sachs puppet, here: Crime & Federalism: Henry Paulson Lied to Congress About AIG and Goldman Sachs

now that i think about it, as a Primary Dealer, that preferred dividend of BofA is probably about as safe as the full faith and credit of the People who were so well served by this Treasury Sec'y, the 4 blathering fuking lips of greenspan-batmanke, and our beloved 8-year,  never-made-one-bit-of sense-about-anything President, Bush jr, the neo-conservative evangelical christian goobernor from the republic of texas.  amen.

or, as TruthInSunshine might say: "there's a massive aggregate liability base of deeply impaired assets still sitting out there like an unstable thermonuclear weapons cache."

so, if you are in WalMart and wonder where tf all the adult diaperz have gone(?), slewie has 9 warehouses full and is gonna trade them for one (1) $5 dollar (1/10 oz) US MINT-produced gold eagle/pkg ,  right around july 1.  if not sooner.

now, let's get that bracketology workin and get some money down on something Real:  March Madness!!!

Fri, 03/11/2011 - 08:38 | 1040067 Temporalist
Temporalist's picture

It could be the die "has" been cast.

Alea iacta est!
Fri, 03/11/2011 - 12:44 | 1040797 Goldust
Goldust's picture

Slewie, he is not talking about dice.  When a "die" is cast, that refers to a piece of metal formed by "casting" to be used in a manufacturing process.  It means that the future is predictable because the system for creating it has been constructed...

Fri, 03/11/2011 - 00:20 | 1039444 Charley
Charley's picture

Has anyone checked these numbers against an ounce of gold. In gold terms, the money supply is still contracting. It has lost 20% of its value since Feb. 2010.

Fri, 03/11/2011 - 09:21 | 1040167 Andy_Jackson_Jihad
Andy_Jackson_Jihad's picture

Doesn't matter what its doing, only the rate of change in relation to economic output in the same units.  You can still have inflation if the broad money supply is contracting slower than the economy.

Fri, 03/11/2011 - 00:36 | 1039503 glenlloyd
glenlloyd's picture

up up and away in my beautiful bubballoon!

Fri, 03/11/2011 - 02:49 | 1039797 JW n FL
JW n FL's picture

The "Ber-Nake" has printed so much money that it caused the pacific plates to shift.. thusly an 8.8 earthquake has hit Japan.


Fri, 03/11/2011 - 03:16 | 1039827 TexDenim
TexDenim's picture

I wonder what the correlation coefficient of that chart is with the price of gold? Very high, no doubt. Do the Feds really think they can get away with this? Yes, I suppose they do. In the long run, we are all dead, said Keynes, and so others (not us!) have to clean up the mess.

Fri, 03/11/2011 - 07:12 | 1039964 halcyon
halcyon's picture

Putting things into perspective:



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