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M2 Update: 10th Consecutive Increase, And Some Troubling Trends
In the week ended September 13, M2 rose to a fresh all time record, just above $8.7 trillion, representing the 10th consecutive increase in the broadest monetary aggregate tracked by the Federal Reserve, during which time $115 billion in new liquidity has been injected in the US economy. Additionally, since the 2010 M2 lows recorded oddly enough on April 19, around the time when the S&P peaked for 2010, there has been $235 billion of money injected into M2.
Yet a peculiar observation arises when one looks at the components of the M2 - the bulk of the individual pieces of M2 (and M1 by definition) declined: there were W/W drops in Demand Deposits, Other Checkable Deposits, Savings Deposits at Thrifts, and especially Small Denomination Time Deposits, offset only by Savings Deposits at Commercial Banks. Now that is rather troubling, because the former list represents products used by the "less than wealthiest" to park their money. It appears that in the prior week (and throughout 2010), what's left of the middle class continues to actively withdraw its saved up money, but the net effect was offset by increased deposits into Commercial Bank savings deposits: traditionally capital storage reserved for the richer (due to the relative immobility of the capital: the vast majority of Americans for whom money does not grow on trees, prefer to have instant access to their deposits). This makes us wonder: is the trend seen in the stock market being replicated in the bank deposit realm? Are the lower and middle classes actively withdrawing money from banks, even as the wealthiest 1% continues to deposit? No wonder then that Huffington's campaign to punish the TBTF's by extracting their deposits is not working.
The weekly capital reallocation in the various M1-M2 components can be seen below. Pay particular attention to the blue bar: that is the Savings Deposits at Commercial Banks weekly total, and YTD amounts to $316 billion, even as total M2 has increased by "only" $220 billion. Indeed, the biggest outflow has been the Total Small Denomination Time Deposits, or the place preferred by the less than uberwealthy to store their money.
This also fits perfectly with the recently discussed theme of increasingly more of America performing hardship withdrawals and premature terminations from their pension funds, discussed previously here. Just how much of America is living paycheck to paycheck?
A summary view of the historical change in M1 and M2.
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How bout M3? Isn't that the only one that's important?
That's so 2006, they're too busy to be bothered with that.
That's so 2006, they're too busy to be bothered with that.
It's dropped 22% from peak and is only starting to turn around (it's retraced maybe 3% of that 22).
Can you say, "debt deflation spiral"?
I knew you could.
http://www.youtube.com/watch?v=bU5ETB2YHCE
J a double z Thursday,,,,With sounds in the nighttime....
Gold should have crashed weeks ago.
But since it is still going up, that means the printing presses are wide open in high gear.
If gold crashes by 30-40 points, well, then we can say that there is trouble brewing in the financial system and we can expect a major "dislocation" somewhere.
The only thing that makes gold go down is intervention or changing the rules at the exchanges. And both those things are temporary. Last December, gold's rally was not cut down by market forces. It was cut down by changing the margin requirements at the exchanges timed with the IMF dropping 400 tons in large chunks. Combined, they took out margin accounts. But now the bull is just stronger for having been pruned prematurely.
Mr. GLD is saying "ain't I shiny and scary at the same time"! That's to bull AND bear. forget just arguing with a gold bug--argue with gold itself and see what it gets ya. point well taken, tho.
Gold should have crashed weeks ago. WHY??????????????????????????????????????
But since it is still going up, that means the printing presses are wide open in high gear.Your question answered by you,,,are you dreaming??,, This is news to you????????? And you have privs to post pictures on this site....TD has a historical obligation to you???????????Contributor...of the early form.
If gold crashes by 30-40 points, well, then we can say that there is trouble brewing in the financial system (No Shit the financial system is in trouble???) and we can expect a major "dislocation" somewhere. Ya in Boston or maybe in Chicago..... Enlighten us...Orlando, Wayland Ma, Houston TEXAS, The MOON???? Afghanistan,, Paris, Turkey, Russia, Rome,Gary Indiana, Tampa Florida, Chico Ca, ................................,
GOLD NEVER MOVES....ONLY THE DOLLAR..
geopol
Several months ago, a group of three men dressed in dark Men's Warehouse suits and hoods (buy 2, get one free) and brandishing SIG P226 Navy Seal Edition 9 mil semiautomatics grabbed RobotTrader while he was feeding his crocodiles and carried him off to some deserted warehouse. I suspect it was the main terminus for the Men's Warehouse chain, but I have no proof. After two hours of water boarding Guantanamo style, he gave up his password and was summarily executed with three slugs to the back of the head.
Since then this impostor has been posting under the Robo ID and avatar. We've repeatedly asked him what happened to the real Robo, but have only been met with silence. I pieced together the above summary after I hacked his e-mail account and managed to download some correspondence before he caught on that I'd intruded and locked me out.
At least the fake Robo did change out the push up bra avatar, but he clearly has lousy taste in women, the first tell that something had changed with Robo. Rest in peace Robo. You were the best.
Good call, Mr. Dissonance! And thank you again. Thought I was going insane.
CD,
This is what I will do for gold...,,,I'm not that old....On a casual weekend...First to cross the Finnish line 100oz eagles...
http://vimeo.com/10555652
http://www.youtube.com/watch?v=wV0wPBYDQ6Y
I have met you in person and I've shaken your hand. And while I have no doubt of the steel in your back and the steadiness of your legs, you wouldn't last 5 seconds on a skate board. So don't even try if you wish to live long enough to publish again. I win by default.
I'll email you instructions on where to send me my 100 oz Eagle. :>)
Try this:
Turn the volume down on the skate vid. Press play on the "Ecstasy of Gold" vid.
Result? Ennio Morricone goes with and improves everything!
CD
1oz Eagle!!!! Damed Vodka....
geo
Stick to stocks, Robo.
Treasuries should have crashed weeks ago.
But since they are still going up, that means the printing presses are wide open in high gear.
If treasuries crash by 30-40 points, well, then we can say that there is trouble brewing in the financial system and we can expect a mojor "dislocation" somewhere.
+1, lulz
"Gold should have crashed weeks ago."
Just to shut you up, please post what Gold will be January of 2011 and January of 2012.
Jan 2011: $1450
Jan 2012: $1900
Jan 2013: $2800
But maybe Robo just knows just a bit more about LBA and JPM manipulation than you do?
Love your stuff Robo, how come no more charts posts? those are the best!@
RT,
30-40 points is a crash in a fourfold rise in nine years? More like a blip on an asymptotic curve. Methinks that for all your keeping us "abreast" of things (and thank you for that), you don't really understand what's going on. Suggest you visit FoFOA on a regular basis from here on in:
http://fofoa.blogspot.com
I'm with Robot on this one. A Gold crash will be the tell. Competetive devaulation game is on, but to inflate, you also need wage and capacity pressure. So currently on a scale you have from 1 to 10, currency debasement 7, wage pressure 1, and capacity constraint 4. Inflation is abort on launch; not happening. Ben's bluffing because the QEII is untested technology and the unintended consequences could be problematic (death spiral in LT interest rates anyone?). Economy underpinned by rotting asets, housing inventory, pretend and extend, you name it. I'm with Jim the Realtor on this one. Just mark everyhting to market. We know gold is going to $300 an ounce, Dow to under 1,000. Let's just do this thing and get it over with and move on!
Gold to $300 or $3000 per oz?
RT, the truth hurts them doesn't it? Gold is a commodity. Its value goes up and down according to demand in the market everyone. DEAL WITH IT!!!
JP Morgan (before domestic default): Gold is Money
Alan Greenspan (before International default): Gold is Money
Anonymous Internet commenter (before fiat default): Gold is a commodity
Step right up and place your bets!
I don't bet on thiefs and the mentally challenged. Figure out who of the abouve falls in which category.
Believe it was sometime last week, Bloomberg on in the background, and Jon Erlichman goes to a chart of gold, and starts discussing how it is in a very bullish trend because people are flocking to it because of currency debasement and sovereign debt concerns, etc.. On one hand, I was happy to see some rational discussion of gold's move going on, but on the other hand, a little warning bell went off. If the same thing had happened on CNBC, I would likely have sold my mining shares then and there. This week I started taking profits. I may be kicking myself next week, but ...
...but what? A bad play is a bad play.
Where were these goldbugs when Dubya was blowing trillions out his ass on two wars, funding better living through chemistry for seniors, and giving billion-dollar handouts to the pinstripe crowd? You think our sov debt concerns are a recent development?!
Wait till they get to M5 and it takes over.
i've always wanted an M5, although I've test driven a 6 and what a ride.
A V-10 after peak oil? How gauche.
A decreasing M1 with an increasing m2. Maybe there is a massive stealth inflation going on. Payrolls are included in m2 if put it mmf, right?
in Japan as in the USA during the depression people put their money in the post office. needless to say "that ain't happenin' this time and in this place." (hey, look...philosophy for dummies!) in short "if you back the entire financial system in a corner it goes for gold." you won't see me with the bling--although i did just get done talking with a detective who had his share. i took them as trophies.
use forever stamps as a hedge...
at least until the post office shuts down.
Is WoW's money supply part of M3?
Just like in the real world, the Chinese control the supply of gold in Azeroth as well.
As a former Bliz developer (98-05), I can assure you WoW has plenty of gnomes with printing presses too.
More and more FRNs sloshing around......and yet it's hoard, hoard, hoard..... after paying down debt, debt, debt. No wonder people are flocking to buy California King Mattresses.
Deposits are down because coin shop sales are up, BIG TIME.
If you compare these M1/M2 changes with the SP500 over the same period.....there seems to be a pretty good correlation with increases of M1/M2 when the market is selling off and then decreases of M1/M2 when the market is rallying.
We all suspect the Fed is acting as buyer of last resort to hold the market up. When a rally catches hold, they sell into it to try and prevent too much dilution of the currency.
Someone alot smarter than me should look at this theory.
the big winners in the debasement game are the ones who get the most first. when gold runs out for the comex and london the FRNs will own the markets and all thats worth owning. they will pay back the paper, for what it will be worth.
Weekly monetary aggregates are very volatile. If you're looking at changes in anything less than 4-week averages, you're mostly looking at noise.
The broad trend is both M1 and M2 growth accelerating - the past 13 weeks were up 7%/4.6% annualized versus the previous 13 weeks, whereas the past 26 weeks were up only 4.5%/2.8% annualized versus the previous 26 weeks.
The broad trend in demand deposits is up, savings deposits up faster. Both gains are probably more business than households.
Business is reducing capital expenditures to run up cash. Revenues continue to fall and this will end badly. Look for more productivity drops down the line and shakeouts as some are forced to finally bleed out their cash in the final stages as again revenues continue to fall along with production and they try to maintain their share of a dwindling market with razor thin margins and mounting operating losses for the least efficient. It would be great if exports could come to the rescue from a weaker dollar, but it ain't gonna happen.
IMF is ringing the PIIGS doorbells.
Introduction:As the topic” creation of SDR and its role in solving liquidity problem” suggests, we are going to look in the past that what was the purpose behind creation of SDR, the various stages which it went through what is its present position and how far is it serving the purpose for which it was created ie; to look after the liquidity crunch.
http://www.scribd.com/doc/4433641/SDR-by-IMF
SDR basket were revised based on the value of the exports of goods and services and the amount of reserves denominated in the respective currencies which were held by other members of the IMF. These changes became effective on January 1, 2006. The next review will take place in late 2010.
http://www.imf.org/external/np/exr/facts/sdr.htm
REPORT TO CONGRESS ON THE USE OF SPECIAL DRAWING RIGHTS BY
IMF MEMBER COUNTRIES
August 2010
http://www.ustreas.gov/offices/international-affairs/Report%20to%20Congress%20on%20SDR%20Use%20--%20August%202010.pdf
I think the "less than wealthiest" are running low on money. They are having to tap their investments and they are also drawing down their bank accounts. Eventually, they will simply run out of money. All these thoughts of running away from the HFT-dominated market and running away from banks is over-complicating a fairly simple phenomenon.
Aren't the commercial banks benefiting immensely from the inflow into savings accounts given that the reserve requirement for those kind of accounts is 0%?
It would appear that the second piece of the puzzle is in place.
The liquidity/leverage via M2 has found it's way to the markets through the big 'playas' and not 'trickled' to the 'great unwashed'.
Thereby, completing the set-up, Bernanke has gotten his wish.
The return of big money to 'risk' assets but shadow banking's slow burn has continued offseting any sort of real 'gain' that would 'trickle' to the middle class and caused a number of worrisome correlation anomalies in the process.
Counterparty risk has never been higher (even exceeds the 2007/2008 timeframe). EFT and HFT meltdowns are going to be the end game and it does not appear to end well ... for anyone.
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