M2 Grows By $40 Billion In One Week, Hits Fresh All Time High

Tyler Durden's picture

Just in case someone was confused about the relationship between liquidity, currency devaluation and nominal (not real) asset prices, the St. Louis Fed was kind enough to email us their weekly M2 level. And after last week's surprising drop, M2 once again rose, this time by a whopping $40 billion. Oh and before someone says that M3 is still declining, it isn't. Or rather the much more important monetary aggregate, that including all shadow banking liabilities is now increasing as we indicated during the last Z.1 spread. In one month, when the next Flow of Funds report is released we are confident we will confirm that in Q4 shadow banking increased by at least half a few hundred billion on an annualized basis. In other words the central bank reliquification is now on in full force, both in America and in every other place that has central banks. Which also explains why central banking hawks are now virtually extinct (cf: Axel Weber).

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Roy Bush's picture


hambone's picture

No wayyyyy....that's exactly what I was gonna post.  WEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE

We're rich...we're rich...weeee

OT - I'm fucking losing my mind

flacon's picture


Roy Bush's picture

No, no...You have it wrong.  You have to put it in the context of the purchasing power of the average American in the very near future.  It's a different kind of WEEEEEEEE!


buzzsaw99's picture

Do you hear it? Banjo music.

FaithEqualsZero's picture

I'm still waiting for my Obummer bux!

whatsinaname's picture

Pity the central banker for India - at rate that Fed is going, the 47.1 % CPI food component will be like harakiri for Indian RBI chief.

Spaceman Spiff's picture

I say we go with an 'Idiocracy' dollar....   Back it with a basket of goods consisting of french fries, mountain dew, porn, and burrito coverings.





topcallingtroll's picture

Frito Pendejo...the most politically incorrect character ever!

hambone's picture

Life is short and manipulation (not oral...financial) can go on a long time.  Thanks for the laugh along the way.

ColonelCooper's picture

Don't say oral.  I just saw a clip of Angela Merkel and I'm filling up.

rocker's picture

Did you say you saw Angela's clit ?                                        Must need new reading glasses.            LOL

mynhair's picture

Oh gawd, the visual pain!

Cthonic's picture

Don't forget the electrolytes.

AssFire's picture

Hmmm, now why would the IMF be looking to replace the dollar??

Ungaro's picture

'Cause the IMF (Ignorant Mudda F***ers) would prefer a different brand of toilet paper than Dr. B. S. Bernanke is pushing.

Apart from Reality's picture

Damnation.  I will have to Add an M2 dial to my Market Manipulation machine now http://www.apartofny.com/more-on-the-amazing-market-manipultion-machine/...



plocequ1's picture

M2 is the Bus that takes me to Brooklyn every morning.  Rally on

Tao Jonesing's picture

M2 is one of several money supply aggregates that the Fed tracks.

M0, also called "base money," is the total currency in circulation, including currency maintained by banks as reserves.

M1 includes base money minus bank reservers plus "demand money," e.g., checking account balances that depositors may draw upon "on demand."

M2 is the next level up and includes M1 plus savings accounts and certificates of deposits valued at less than $100k.

The Fed no longer tracks M3, but that aggregate includes all of M2 plus CDs > $100K and other big money institutional accounts.

When considering the growth in M2, I'd like to understand what portion of that growth was actually growth in M1.  Before asserting that M3 is growing, too, I'd like to understand what portion of that growth is actually M2 growth.  It could be that a substantial portion of M2 growth is due to money moving from M3 to M2.

As much as people talk about out of control money printing, you're not seeing that reflected in the amount of money that is really in circulation.  For example, the banks sucked up all of QE1 as reserves, the amount of money in circulation has pretty much stuck to the mean growth line that existed before QE1.  QE2 is a different matter: almost all of that money is going leveraged financial speculation, and when you see $40B being added to savings accounts and CDs in one week, you're seeing the "cash" from the sales of financial assets purchases with QE2 money that has been levered up through fractional-reserve lending (i.e., money created out of thin air).

If you look at everything from a practical point of view, you'll see that the banks only have enough currency on reserve to pay for about 110% of what's on deposit in demand accounts, so rising M2 is just creating more claims to the same level of base money.  So, looking at M2 to find hyperinflation is kind of silly, as not all of it can be redeemed for currency.  What rising M2 tells us, though, is we have inflated prices in financial assets, which is giving rise to what my banker friends call screwflation.

Freewheelin Franklin's picture

When considering the growth in M2, I'd like to understand what portion of that growth was actually growth in M1.  Before asserting that M3 is growing, too, I'd like to understand what portion of that growth is actually M2 growth.  It could be that a substantial portion of M2 growth is due to money moving from M3 to M2.


That information will be provided on a "need-to-know" basis, and you, sure-as-shit, do not need to know. Actually, we don't know, either. We're too fucking lazy to do the work.




ThirdCoastSurfer's picture

M2 Jan

1980 1486.2

1981 1610.6

+8% YOY


1990 3176.1

1991 3293.8

+4% YOY +51% DOD


2000 4668.9

2001 4971.6

+6% YOY 34% DOD


2010 8476.3

2011 8840.0

+4% YOY +44% DOD

All % are rounded

Thus the story and the mystery is and remains M3. 

I think the contention that those who own and control that unique and hidden part of M3 ($100 million bonus Institutions) continues to increase by leaps and bounds while maintaining social stability through a manufactured stable M2 is spot on. 


becky quick and her beautiful mouth's picture

looks like the trajectory of the missle the chinese fired off the coast.

hambone's picture

You mean to say the plane that took off from nowhere and landed nowhere (apparently that part of the world doesn't get much air traffic and no way to track these things down there).

BKGuy's picture


How does your M3 analysis reconcile with that of John Williams at ShadowStats.com, which still suggests M3 contraction m-t-m and y-o-y?

topcallingtroll's picture

It would be interesting to hear a discussion about Tyler's numbers versus Williams' numbers.  The main reason the fed said they dropped m3 was that it could not be reliably calculated, and that m2 was sufficient. 

Ungaro's picture

Nah, attempting calculate M3 caused an arithmetic overflow on the Cray and crashed the whole RPG program.

Bigger Dickus's picture

Tyler, why all the hype? You're clearly biased when you don't mention the proportional fall in velocity.

Tyler Durden's picture

M2 Velocity is a qtrly number and the last release was in October. How do you know it is currently declining? Shadow liabilities increased post the last velocity update. We are "100% confident" the next velocity reading will be up - not difficult: after all it is based on a manipulated GDP number. How about the first time increase in revolving loans in two years? What about the $1.7 trillion (as end of June) in excess reserves just waiting to be unleashed and blow up the economy, which can only be protected by the Fed hiking the IOER to 3,4,5% or higher which inverts the curve... and blows up the economy?

No hype - just the facts.

topcallingtroll's picture

I sure hate to have to agree with you, but velocity probably will be up, but my crystal balz tell me that it won't be up as much as people feared.  Looking forward to you reporting on it!

Bigger Dickus's picture

Ok, but there's no lending to speak of so V can ultimately only come from credit creation from credit sales or a wage spike. The spike in credit purchases would have to be HUGE for it to hve any effect and I'm not seeing a wage spike.

Sorry Tyler, you should be on the deflationary side just to hedge your long PMs calls. That's what I'm doing.

topcallingtroll's picture

I've just went long silver and have been long natgas since 5.47.  This means for sure that deflation and a stronger dollar are here for the next few months.

Tyler Durden's picture

"Deflationary side" assumes Bernanke is rational and he will agree to throw away two years of lunatic monetary policy. He won't. He is stuck in a corner from which there is no exit. The more he prints the more he has to print (even though incremental debt benefit is now negative). He will print until his CPI model tells him he is succeeding at creating goldilocks core inflation (which it never will in the New Normal - for the reason why, see two years of posts on Zero Hedge), or destroy the dollar in the process. Bernanke is convinced there is no threat to the dollar as a reserve currency status. He is very wrong there too. Throw in the need to monetize $4 trillion in debt in two years, and there is no chance he will stop printing. Sure, he will crash the market in March/April when 10 Years hit 4% and everyone gets worried about rates, but all that will do is reset the new baseline for gold/PMs, just like back in 2010. Then when QE3 is announced later in the year, the last case for "gold as money" will be made. At that point the price of gold in USDs will be irrelevant.

slewie the pi-rat's picture


nice quote from sartre.  maybe RT knows if there's an ETF w/ a triple lindy.

other than physical, of course.

Caviar Emptor's picture

The more he prints the more he has to print


You nailed it, Tyler. It's a negative feedback loop. And the US has now joined the ranks of bankrupt nations of the world at a bad time. He's Atlas supporting the entire financial complex on his back. He's got no choice but to keep forging ahead and hope for a miracle. But he's tarnishing the brand. 

CrockettAlmanac.com's picture

The Bernanke is no Atlas. He's a Mouch.

truont's picture

"Deflationary side" assumes Bernanke is rational and he will agree to throw away two years of lunatic monetary policy. He won't.

Exactly, TD.

Robert Prechter and deflationists would be correct, but they completely ignore the monetary power CONgress has handed over to the banksters (who own the FED). 

Spalding_Smailes's picture

WASHINGTON, D.C. – Feb. 10, 2011 – The Association of American Railroads (AAR) today reported a mix in weekly rail traffic as a result of winter storms in parts of the country last week. For the week ending Feb. 5, 2011, rail carloads were flat with U.S. railroads originating 267,682 carloads, while intermodal volume was down 1.5 percent to 198,249 trailers and containers, compared with the same week in 2010. Intermodal container volume declined 2.5 percent while trailer volume increased 4.1 percent.

Eight of the 20 carload commodity groups posted increases from the comparable week in 2010 with metallic ores leading the groups with an increase of 33.5 percent.Commodity groups reporting notable declines were farm products excluding grain, down 17.9 percent; grain mill products, down 14.5 percent; coke, down 14.1 percent; and waste and nonferrous scrap, down 13.3 percent.

Weekly carload volume on Eastern railroads was up 5.8 percent compared with last year. In the West, weekly carload volume was down 3.6 percent compared with the same week in 2010.

For the first five weeks of 2011, U.S. railroads reported cumulative volume of 1,409,975 carloads, up 6.4 percent from last year, and 1,061,348 trailers and containers, up 5.7 percent from the same point in 2010.

Canadian railroads reported volume of 67,536 cars for the week, down 2.6 percent from last year, and 44,322 trailers and containers, up 1.7 percent from 2010. For the first five weeks of 2011, Canadian railroads reported cumulative volume of 345,678 carloads, down 1.8 percent from the same point last year, and 222,918 trailers and containers, up 2.4 percent from last year.

Mexican railroads reported 13,248 carloads for the week, up 18.9 percent compared with the same week last year, and 7,581 trailers and containers, up 46.2 percent. Cumulative volume on Mexican railroads for the first five weeks of 2011 was reported as 71,704 carloads, up 9.1 percent from the same point last year, and 34,803 trailers and containers, up 11.6 percent.



Twindrives's picture

Hey Spalding, why don't you jump on a boxcar going to Mexico.  You won't be missed, we promise. 

mynhair's picture

Incremental went negative?  Thought we still got 4 cents for every buck!  Damn, I need a less comfortable couch!

teolawki's picture

In a nutshell...the pooch is screwed and pregnant.

Snidley Whipsnae's picture

Excellent points... "At that point the price of gold in USDs will be irrelevant."

To me personally, the gold to dollar ratio is already irrelevant.

...and, the Fed has no realistic way to change course. If they try to withdraw liquidity from the system by selling the bs they bought from the money center banks they will find only offers of pennies on the dollar.

The Fed is on a one way street terminating at a brick wall... and their accelerator is stuck to the floor.

ArkansasAngie's picture

So that's what TBTF Bankster Bonuses are for ... the start of trickle down.

Hedge Jobs's picture

agree with TD here Bigger Dickus not too sure setting up for deflation is such a good idea. I got toasted doing the same thing mid last year. I was in the deflation camp thinking QE1 was a one off. Had QE2 not been announced the deflationary double dip was a certainty if the economy been left to run its natural course. Its QE3,4,5 whatever it wont matter there will be no deflation so just BTFD!

Congrats to spitzer on this though, he was calling hyper inflation over deflation long ago.


Snidley Whipsnae's picture

We're going to get both. Hyperinflation and deflation. Get popcorn, watch show.