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M2 Rises To Fresh All Time Record, 19 Of 21 Consecutive Weekly Increases
One of the funniest lines in Bernanke's speech last 60 Minutes speech is when he said that the currency in circulation has not increased despite his monetary easing - ergo there is no inflation. Of course, as even doorknobs know by now currency is merely one component of physical and binary money out there. But trust a pathological liar to expect 60 Minutes' viewers to be dumb as a bag of hammers. Of course, a far more important metric of the moneyness of the system, is the M2 aggregate (technically M3 is far more important, but as per the Fed's March 23, 2006 decision, M3 was discontinued as "M3 does not appear to convey any additional information about economic
activity that is not already embodied in M2 and has not played a role
in the monetary policy process for many years. Consequently, the Board
judged that the costs of collecting the underlying data and publishing
M3 outweigh the benefits." Ah yes, the Fed is worried about costs...) Anyway, the M2 has just risen to a fresh all time record: in the week ended November 29, Seasonally Adjusted M2 was $8,812.2 billion, which is the 19th week of the last 21 in which this metric has increased. Is inflation about to prove just how much of a monetary phenomenon it really is? But not to worry - the Chairman is well ahead of everyone in withdrawing all of this excess money already percolating through the economy.
And here are the components of the M2:
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Next up, Ben's "M2 is being discontinued" release!
They'll just do away with keeping track of the money supply, altogether, claiming "it's just noise and serves no legitimate economic or monetary purpose for us in carrying out our 183-fold mandate."
WTF. Did The Bernank say that?
Google comes back empty.
Yeah, it's so fuckin' expensive these guys have managed to publish it for FREE:
http://www.nowandfutures.com/key_stats.html
Fed = Firehose of Bullshit
Fed = Firehose Expelling Donkeydung
Fed = Fan Excrement Disperser
Fed = Feces Every Day
Fed = Fiat Excessively Distributed
or let's discount it;)
But he didn't lie. He specifically said 'in circulation'.
Just like he is not monetizing the Debt; just pieces of it.
The Bernank has taken a few lessons from The Won on being a deceiving TOTUS.
WSJ puts the lie to "he didn't lie". He specifically did lie.
http://blogs.wsj.com/economics/2010/12/08/demand-for-us-cash-surges/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wsj%2Feconomics%2Ffeed+%28WSJ.com%3A+Real+Time+Economics+Blog%29&utm_content=Google+Feedfetcher
Cash in circulation is up and increasing at a greater rate.
I particluarly focus on the 44% increase in printing of $100 notes. Weimar printed money because there was a shortage of it, there was huge demand for it...and no one understood why, they just met the demand until they couldn't.
btw, specialist currency printer De La Rue is in great demand.
ps, sry 'bout the link
Forgive me for my NEWBINESS, but a few days ago Tyler you upped a piece basically stating that the government is the biggest creditor in the non-revolving part of the market. This increase in M2 would be due to much of this spending, correct? If so, would a new congress that's coming in January that might go spending cut crazy cause a drop in M2?
I think you are crazy to think they will cut spending. Their leader will guide these freshmen over the falls with a tear filled speach about why we need TARP 2.
Oh, no I don't think they'll cut spending. I just wanted to know if the 2 issues I raised equate to eachother or if there are any other factors that I might be missing. Like I said I'm pretty newbish around these parts. I'll be asking alot of questions lol.
Rising yields should deter too much more spending and with flat to nearly declining inflation of the total money supply will probably spell the end of deficit spending altogether, sending us over the waterfall and to the next reflation trade.
So you're thinking deflation? My thing is this, and please I'd appreciate people chiming in on my opinion. I think the banks have basically given up on the U.S. and they're taking the money that they're getting from the Fed from interest on reserves and POMO/QE and bidding up stocks AND they're running overseas with hot money and bidding up commodity prices while emerging markets build. This will cause rising consumer prices here at home, while other assets such as Real Estate fall. We could have an inflation AND deflation thing going on all at the expense of the American, especially those who aren't protecting themselves with gold and silver.
BUT! Now that China, Brazil and others are on a path of raising rates and reigning in domestic inflation, maybe there is a possiblity that we'll see deflation in all asset classes in 2011, including commodities?
Bi-Flation: Inflation of all the things you Need, Deflation of all the things you Want.
Prestidigiflation. The audience can never know the magician's secrets.
stag deflation: the cost of borrowing money is less than the money earned for lending it.
OutriGht contraction in everything potentially.
"No place to hide"
costs of living thru the roof in real terms. many items become scarce.
Oil prices too high to be accomodative to commerce much longer. The fed doesnt print oil.
inflation in all things that can be exported/imported and deflation in all things that have to stay like real estate and services. but i think the deflation of those goods will be more a result of no price increases for awhile rather than a drop, or at least a slower rise than the real inflation.
but as i've said too many times, and sorry if it's getting old, but eventually all things will deflate relative to the price of real money(gold, silver etc.). dang i hate sounding like a gold bug but that's how you get inflation and deflation at the same time.
StayHomeFlation.
Winners (or at least not as big of losers) = grocery stores, utilities, Amazon, etc. Losers = restaurants, retailers, commercial property, gasoline refiners.
As more Americans cut out cars, insurance, trips out to restaurants and malls, and hunker down at home, many even CUTTING CABLE OFF (do the research on cable subscriptions across the provider board - it's stunning), more time is spent at home and not on auto payments, gasoline and retail.
Watch for this trend to accelerate. This is just one of the many examples of the ways ever 'budget-adjusted' Americans are innovating to offset rising prices. There will be much more adaptation.
Watch specifically at the numbers of households that are cutting cable or sat television but keeping high speed internet lines, as economic reality is actually motivating people to stream television shows on their PCs. I fully expect Google to enter the broadband ISP space to compete with Comcast and others soon, and they will crush competitors' margins, just as they have done with VOIP providers.
From an academic perspective certainly a worthy question. But, agreed, socio-political reality is whole 'nother . . . well, the controlling reality, it woud seem.
You should post total credit market debt obligations chart to add context to M2.
The real helicopters have been grounded since late 08
Ergo ...vis a vis...concordantly :-)
http://www.youtube.com/watch?v=Ra5-H9ZBS1U
The thing that seems to escape most everyone (although it’s obvious) is that we have simultaneous inflation and deflation--but in all the wrong places squeezing people financially. We have deflation in wages, real estate and general pricing power. At the same time we have inflation in the cost of living and the cost of doing business.
US initial jobless claims are stubbornly high with too many people in the work force and home sales + prices are down (deflation) but there's a monster rally in commodities and stocks (inflation). Tuition hikes continue upward, credit card rates are high, health care premiums are rising and the cost of doing business is rising due to too many layers of government bureaucracy and regulations. This is squeezing the middle class and small businesses.
It is in great part due to over 30 years of a deliberate attack on wage inflation to increase corporate profits that has now turned into wage deflation thanks to relentless outsourcing of US jobs and the painful effect of globalization on the US. Credit has been the only way for the middle class to afford prices, so a debt bubble formed. Deficits were allowed to grow to the sky all to finance inflation masquerading as growth in a country that outsourced production and specialized in importing finished products.
This is increasing the divide between the haves and have-nots. The US is just a couple of years behind Europe. Wait until the Republicans gain full power and they start to implement austerity programs like in Ireland and Greece in order to reduce the federal deficit. Then, the riots start and crime spikes upward.
It’s the double whammy inflation/deflation squeeze that is stressing out the economy.
Excellent summary.
good points all.
wish i could be that coherent, well said.
i think it's also by design and when everyone calls them idiots, i think that's what they want us to think. "we don't want them to think we are doing all this on purpose"
the reason stocks might be getting more expensive is the future central planning committee already owns most of it and they aren't selling. the reason the dollar is allowed to disintegrate is maybe they want to replace it with a global currency. the reason they are allowing the economy to crash could be they are trying to bring us to our knees and beg for changes. (it's amazing the concessions people will make when they are starving)
i've a feeling it's all orchestrated but hope i'm wrong.
So we should buy stocks right?
+ Keeping buying PMs--gold and silver.
+ Reduce your debt levels so that you are in no danger whatsoever of losing your home and means of transportation. High levels of debt will be absolutely toxic when interest rates start to soar if the Bernanck loses control of the bond market.
It's a game of musical chairs, and they keep taking away a chair everytime the music stops. Just be sure you have your chair secured.
High levels of floating rate debt will be absolutely toxic when interest rates start to soar. Fixed.
I'll keep my 5% mortgage and fund it with some 30% paper, thank you.
You guys are just being alarmists. He said he was 100% confident he could handle this.
Yes, The Bernank told Tokyo Rose...errr '60 Minutes' that he could raise interest rates in 15 minutes if the need arose to beat back inflation.
Never mind that no economist with an ounce of credibility will/can ever deny that from the time rates are hiked, it takes a minimum of 6 months to have any impact on inflation once inflation has set in.
But if Bernanke raises interest rates (I don't know why he would need to since CPI doesn't include food, energy or medical care costs), he'll whip inflation nearly instantaneously. He's a magician, too.
... but The Ben Bernank is 100% certain of success... The arrogance of that statement leads me to wonder if the guy is really a pathological liar. The Ben Bernank can not be 100% certain that the sun will rise tomorrow.
otoh, if he's wrong, he's dead. So no real downside. - Ned
To find out more about the Imminent Collapse of the U.S. Economy, watch this video "Politicians Spending Like Drunken Sailors, American Dream Dead, Collapse Imminent" at (http://www.youtube.com/watch?v=DpAbDtl_t1Y).
by Anonymous
you'd be smiling to if you got the bonus package these banksters got. what a bunch of useless criminal sacks of crap these individuals are. Unfortunately, they are in control now. But the ability of the American sheeple to put up with this crap? is well documented. We are absolutely screwed, blued , and tattoed. The only thing we can do, is obtain gold and silver to protect our assets. Then, sit back and watch everything collapse. And is IS going to collapse.
the real bonus is the 'get out of jail free' card. even the fines are probably paid for them. they are just the pawns in the chess game of 'let's rule the world'
Finally, Tyler, we get back to this face of money. Thanks.
Loved money in school and should be keeping up with the most definitive measures of the economic picture . . . but life is complicated and I'm lazy.
M3 would be better, true, but one thing leads to another (lazy man here suggests a link to the guys at dot.whatever who work that data.).
Much appreciate the continuing thread here, however.
Although a simplistic idea and relationship, the one thing that I keep thinking about is that as M2/3 keeps rising, the base of PMs that support that level of money has to rise as well. This is a separate reason outside the threat of a defaulting currency.
Gold is money--not a commodity that is priced based on supply and demand, but has been a base for money for thousands of years. The reason we went off the gold standard was to allow the monetary base to rise much faster than we could find and mint gold. Now that the monetary base is moving up into the stratosphere, it is pulling the PMs with it. If the world is forced back into a gold standard (fractional gold standard), the value of gold must rise alot more from where it is today in order to handle the current levels of and velocity of money.
The rise of gold is a no-brainer for this reason coupled with the fact that the fiat currencies all over the world are in a competitive race for devaluation.
You have a deep belief in gold as money. All else follows. It seems like the best bet to me--along with credible ferocity and mad social skills, of course.
+1, mmk baby! Mixed Martial Killings....forget the Arts.
The Arts should have no voice in fighting, it seems to me.
Yet there is an undeniable art manifest in fighting.
In Peace you need T"he Arts." At other times, you need the artists themselves.
Operation Payback is not being recognized as a Declared War. WTF?
A new social institution is being established as the undeniable result of this messy Assange afair, and the "common man" is not hearing the whole story, by any means.
There is a fucking WAR going on.
The Bernank is just a bagman in a Kabuki Bukakke that is aiming to get the bulk of what's left of Americans' cash (those who have a positive net worth) into Wall Street shysters' hands.
Of course he will go on national television, and before congress, and tell ginormous lies.
All of these games and this planning and shystering is just more shifting of numbers and assets from one location to another, whether in the binary or real world.
The Beast must be Fed. And the Fed is a Beast.
Tyler, I think the most immediate reply to your question regarding inflation is who are you asking and what do you mean.
The weird fucks who run things are committed to pursuing biflation here.
As to inflation, their answer is to export that shit as possible. China is saying no, but we still have alot of shit people to take our shit from us.
Rate of decay could be surprisingly slow. But then there's crazy shit like PIMPCO . . .
inflation or deflation.....who gives 2 shits. M2, M3 whatever. They all just govt numbers, just like the Chinese numbers. Do you trust either of them?
Its youflation infinity...what you own is worth less and what you will need costs more. Thats our American truth
get use to it.......4 OZs of gold for 4OZs of food.......Fuck that...buy a fishing rod
Just wanted to note how apt the word percolating is...
"the Chairman is well ahead of everyone in withdrawing all of this excess money already percolating through the economy."
I just found an old percolator at the flea market. A real beauty with a copper bottom. I got tired of the flavorless coffee my plastic coffee maker makes. Anyway, I needed some practice with the old percolator. Tips (Mr. Chairman):
1. Don't let the pot boil for any length of time
2. Turn it down LOW as soon as it starts to perk
3. Don't let it perk for more than 4 minutes
4. Caution, the brew will be really, really hot
Percolating can be a tricky business, you have to pay close attention. Actually, it's better if you stay in the kitchen while it's happening.
is removing money from the supply just throwing gasoline on the fire? of course the Fed wants to force people into taking on risk. call it a matter of confidence, if people don't want to take on that risk, and if there is no inflation to warrant taking on the risk, why should they?
What this chart doesn't tell us, and the million (or trillion?) dollar question is:
What are the true mark to market values of assets included in M2 that aren't cash, but which M2 deems as cash 'equivalents?'
This is another area where one can be 100% confident that The Federal Reserve [Bank] is influencing the number crunching in such a way that infuses as much hopium into forward contracts of repayments treated as cash 'equivalents.'
On a slightly off course note, and it bears repeating, one has to view this data in the context of deleveraging and wealth and money destruction elsewhere.
It was just reported that 1.7 trillion in household wealth was claimed to have been created by equity market retracement, on the same day that it was reported that Americans' homes fell 1.7 trillion dollars in value over the last year (9 trillion has been wiped out since 2006 - some claim these are conservative loss estimates).
And then move on to commercial, office and industrial real estate, and add in wage cuts (which aren't captured) and the rest...
Two metrics that are highly useful in gauging economic activity are consumption and property tax data, and both are flashing danger signs.
I am curious to know what income tax receipts will look like for 2010 and 2011.
by that i assume you mean money market funds which may or may not be able to meet their benchmark $1NAV. we've been down this road before, but most of these funds are now on FDIC? the wide variety of these instruments, some in UST, (good), some in corporate bonds (maybe not so good), some in muni's, (okay but maybe not so good now that BAB's has expired). recent conversation with a broker leads me to the conclusion that being conservative in these matters is once again the right thing to do.
So M2 is only up about 80% since 2000 but gold is up almost 500%. Gives you a pretty decent indication of how ridicuously overvalued gold really is.
http://upload.wikimedia.org/wikipedia/commons/c/c4/Components_of_US_Mone...
Don't stop there. M2 is up 11x since 1971, but gold is up 40x.
http://www.thetrailofgreen.com/
But the better measure would be M2 plus the total value of world stock, bond and real estate markets, for a start.
one very important issue your forgetting here in concluding gold is overvalued --> velocity
direct deposit, paypal, etc. help money move much faster which requires less actual money for the system to function effectively.
volts X amps = watts sort of thing... ya know.
unfortunately they left the burner on too long and dinner is toast!!!
In other news from the Fed, foreign central banks' holdings of Treasuries in Fed custody were up a hair, or rather $1b, making a total increase of $5b for the four weeks since Nov. 10. Compare that to their $270 billion increase over the 13 weeks from Aug. 11 to Nov. 11 (>$20b/wk). In other words, the Chinese and other foreign central banks that loaded up on Treasuries during the QE2 prodrome apparently got their fill, as they've bought practically nothing since QE2 started. After all there is a lot less to buy now that the Fed takes some two-thirds of net issuance. China and others with similar policies must be buying some other kinds of foreign currency assets to suppress their currencies, question is what and how long that can last.
Reserve balances at banks, after shrinking rapidly during the QE2 prodrome and the first week of QE2, are now growing rapidly. They shrank from 1045b on Aug 11 to a trough of 984b on Nov 17, a draw-down of more than $60b in 14 weeks. In other words, banks began deploying reserves into the economy in mid-August as soon as it became clear that the Fed would soon be flooding them with additional reserves. And during the first week of QE2, banks actually drew down their reserves faster than the Fed replenished them. But in weeks two through four of QE2, through Dec 8, banks have gone back to letting the reserves pile up as the Fed injects them, and they've shot back up to 1051b, up 67b in just three weeks. One warning: I'm not accounting for Treasury's deposits and withrawals from cash accounts held at the Fed, which adds random volatility to reserve totals, but I don't think changed this story.
This is closely related to the surge in total currency in circulation, which has climbed from $946b on Aug. 11 to $970b on Nov 10 and $976b on Dec 8. In other words the bulk of the surge took place during the QE2 prodrome, and monetary expansion has actually slowed down since QE2 started.
"...how ridiculously overvalued gold really is"
Or how ridiculously over-trusted dollars really were.
Anyone have a good source for Gross National Income data? It's no longer widely used, but it takes into account interest earned, and overseas profits of US based corps. Might be quite useful in the current environment, which may be why the government moved away from it.
So a doorknob is smarter than a bag of hammers?
The argument I hear day in/out in this dotcom, I mean gold, mania market is that the US keeps printing and deflating the value of US $. Well, if that's true then why in US $ has gold blown up 40x vs. M2 11x since 1970 as stated above? Answer: Rhymes with PUBBLE.
To dovetail your analysis, in today's news: Despite a 3.7% decrease in real estate values, household wealth has increased by 2.2% because 50% of American's own "some" stock.
Oh Happy Days!
http://ewireinformer.com/americans-wealth-on-the-rise-34751.html
Not a ton of intelligence here. I was hoping for a bit more.
Just admit you were wrong, CNBC, Geithner and Bernanke were correct!
No "Double-Dip", you were wrong!
Even Marc Faber is a bull now. Get used to it. American is coming back!
http://www.youtube.com/watch?v=BS7bNFBwvf4
Thank the stars! Buy the dip scheme is working!
i think the topic was m2 money supply not double-dip. i guess you wouldn't spot intelligence if you didn't know what the thing you were looking for.