• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

M2 Update: 11th Consecutive Weekly Increase

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Thu, 09/30/2010 - 19:34 | 617029 pamriallc
pamriallc's picture

M2 will expand very quickly.  consider that with 2-3% spreads on capital, and money center banks at 20X leverage, and Federal guarantees, you can *EASILY* have 2-3% X 20 as a rate of return on your net capital base.  why are banks so profitable?  that's why.

it's also why M2 has expanded like crazy.  that's a good thing.  it allows banks to heal, take their lumps, and then lend once again, thus refreshing the system.   consider the wisdom.


God Bless America.


shawn mesaros, pamria, llc

Thu, 09/30/2010 - 22:55 | 617335 DarkMath
DarkMath's picture

"it allows banks to heal, take their lumps, and then lend once again, thus refreshing the system.  "

don't forget to mention it's all made possible by us little people. don't forget us. our tiny pockets all add up you know. we don't mind. i for one vote for the banks. better they have it than those nasty prols. i used to eat steak, but i don't miss it.

Doubleplus good, this. You know, I don’t think there’s a single piece of meat in this stew. Looks like meat. Tastes like meat. It isn’t meat at all. Doubleplus good. Not like it, Smith? Yes, it’s too rich for me. Do you mind if I"... " Brothers and sisters, the battle for production has been won. Completed returns show that the standard of living... has risen by no less than 5 percent over the last year. All over Oceania there've been spontaneous demonstrations of Party workers... voicing their gratitude and joy!

i stand with you pamriallc, brother shawn mesaros of pamria, Limited Liability Corporation, and Voice My Gratitude AND JOY!
Thu, 09/30/2010 - 23:54 | 617470 snowball777
snowball777's picture

Brilliant, Dark.

Thu, 09/30/2010 - 22:39 | 617341 GoinFawr
GoinFawr's picture

Either that or it allows banks to hoard fiat until they manufacture a fraudulent miasma of deflation that utterly destroys those (the middle class) who will never be given the luxury of marking their drowning liabilities as assets (ie to 'sky-pie') and then swoop in once the they are the last band playing and scoop up what's left of any actual hard assets for pennies on the dollar.

At least that is the Banks' wet dream, but we're gonna turn it into their nightmare. Just watch us.

Fraud Blessed America at one time, perhaps, but "on a long enough timeline", and all that cal...




Fri, 10/01/2010 - 00:03 | 617478 rocker
rocker's picture

This is what it is about. How cheap can we buy thier stuff. Great thought GF 

Fri, 10/01/2010 - 00:53 | 617524 RockyRacoon
RockyRacoon's picture

How can you even imagine that when nobody knows how deep the black hole really is?  I doubt even the Fed knows.  Obama is graying like Bush did!

You really think that monstrous money void can be filled with measly "profits" from reserves?

Fri, 10/01/2010 - 01:52 | 617564 Caviar Emptor
Caviar Emptor's picture

Ahhh to dream, perchance to lend...

And start the cycle all anew.

You see, in America we think if you provide enough money, someone else's money preferably, that things just simply can't avoid working out. 

So here's the math: Money X Leverage^2 = Happiness/Excess Body Weight.

America, wake up! Borrow big! Spend big! Eat smaller, though (pigs). 

Fri, 10/01/2010 - 02:30 | 617579 scaleindependent
scaleindependent's picture

F you pamria!

Federal guarantees!! ( That means regular people are guaranteeing your weak ass risk management). And when you and your mini-me clones are done ripping us off, then you get TARP part deux.

"Consider the" ... theft you POS.

"God Bless America". Yeah, we need it because of shits like you.

Thu, 09/30/2010 - 20:00 | 617077 tom
tom's picture

M3 isn't really shadow banking, it's large time deposits, eurodollars and institutional money funds. The last of those is often included in counts of the shadow banking sector, although it's mostly sweeps from corporate bank deposits. All the other usual shadow banking liability suspects are not included even in M3.

Thu, 09/30/2010 - 23:53 | 617469 bull-market_3.0
bull-market_3.0's picture

What shadow banking liabilities are not included in M3? I was under the impression that M3 represented "all the money" including shadow banking liabilities.

A bit of research suggests it includes repos and mmfs, can you confirm what it does not include? 

Are securitized assets included in M3? 

Fri, 10/01/2010 - 00:59 | 617527 RockyRacoon
RockyRacoon's picture

Better minds than mine can answer that question -- and it's a good one.

Fri, 10/01/2010 - 05:19 | 617659 tom
tom's picture

You're right, M3 also includes repos, my omission. Institutional money funds are a kind of money market fund.

M3 at least as defined in the US does not include retail money market fund shares, any other kind of mutual fund, ETF or hedge fund shares, commercial paper, securitization, security credit/rehypothecation, or any kind of bonds.

Thu, 09/30/2010 - 20:22 | 617113 wiskeyrunner
wiskeyrunner's picture

The futures will rise like magic tonight and todays set back will be history by 5am. As I type the stock index futures offers are being pulled and it's floating higher just like magic.

Thu, 09/30/2010 - 20:28 | 617130 surfsup
surfsup's picture

All this "pump and circumstance" just in case the legal genie is further freed from the lamp in the form of "off balance sheet" debts AND mark to myth black holes -- which if brought to the light of day would be pulling at m2 like an angry pack of rottweilers on prozac.   As M/C hammer (2010) says:  "it RICO time..."

Thu, 09/30/2010 - 22:27 | 617337 flow5
flow5's picture

Neither M1, M2, nor M3 money stock growth rates are measures of the rate-of-change in aggregate monetary demand, i.e., nominal gDp. MZM is the best reported.

"Money" is the measure of liqudity, the yardstick by which the liquidity of all other assets is measured.

(Monetary Flows), or aggregate monetary purchasing power, is our means-of-payment money X's its transactions rate of turnover (money actually exchanging hands).  I.e., bank debits best fit these definitions.

Contrary to economic theory and Nobel Laureate Milton Friedman, monetary lags are not "long & variable". The lags for monetary flows (MVt), i.e., the proxies for (1) real-growth, and for (2) inflation indices, are historically (for the last 97 years), always, fixed in length. However the lag for nominal gDp (the FED’s target?), varies widely.

LAGS: Roc’s in (MVt) are always measured with the same length of time as the specific economic lag (as its influence approaches its maximum impact (not date range); as demonstrated by the clustering on a scatter plot diagram).

It’s a scientific fact that economic forecasts are mathematically infallible. Nominal (gDp) will cascade in the 4th qtr (down in every month - Oct, Nov, Dec & ending in Jan), without fiscal/monetary, countervailing, intervention/stimulus. That's why QE2 will start in Oct. & end in Jan. (because of the proxy for inflation).

Thu, 09/30/2010 - 22:44 | 617360 flow5
flow5's picture

First, there is no ambiguity in forecasts: In contradistinction to Bernanke (and using his terminology), forecasts are mathematically "precise” :

(1) “Money” is the measure of liquidity; the yardstick by which the liquidity of all other assets is measured.

(2) Income velocity is a contrived figure (fabricated); it’s the transactions velocity (bank debits - Vt) that’s important (i.e., financial transactions are not random);

(3) Nominal GDP is the product of monetary flows (M*Vt) (or aggregate monetary purchasing power), i.e., our means-of-payment money (M), times its transactions rate of turnover (Vt). 

 (4) The rates-of-change (roc’s) used by economists are specious (always at an annualized rate; which never coincides with an economic lag). The Fed’s technical staff, et al., has learned their catechisms;

(5) Friedman became famous using only half the equation (the means-of-payment money supply), leaving his believers with the labor of Sisyphus.

(6) Contrary to economic theory, & Nobel laureate, Dr. Milton Friedman, monetary lags are not “long and variable”.  The lags for monetary flows (MVt), i.e. the proxies for (1) real-growth, and for (2) inflation indices, are historically (for the last 97 years), always,  fixed in length.  However, the FED's target, nominal gdp?, varies widely.

(7) Roc’s in (MVt) are always measured with the same length of time as the specific economic lag (as its influence approaches its maximum impact (not date range); as demonstrated by the clustering on a scatter plot diagram).


(9) Consequently...by using simple algebra, economic prognostications are infallible (for less than one year).

(10) Asset inflation, or economic bubbles, are incorporated: including housing, commodity,, dot.com, etc. This is the “Holy Grail” & it is inviolate & sacrosanct:  See 1931 Committee on Bank Reserves Proposal (by the Board’s Division of Research and Statistics), published Feb, 5, 1938, declassified after 45 years on March 23, 1983.

 (11) The BEA uses quarterly accounting periods for real GDP and the deflator. The accounting periods for GDP should correspond to the specific economic lag, not quarterly.

(12) Monetary policy objectives should not be in terms of any particular rate or range of growth of any monetary aggregate. Rather, policy should be formulated in terms of desired roc’s in monetary flows (MVt) relative to roc’s in real GDP.

(13) Combining real-output with inflation to obtain roc’s in nominal GDP, can then be used as a proxy figure for roc’s in all transactions. Roc’s in real GDP have to be used, of course, as a policy standard. 

(14) Because of monopoly elements, and other structural defects, which raise costs, and prices, unnecessarily, and inhibit downward price flexibility in our markets, it is probably advisable to follow a monetary policy which will permit the roc in monetary flows to exceed the roc in real GDP by c. 2 – 3 percentage points.

(15) I.e., monetary policy is not a cure-all, there are structural elements in our economy that preclude a zero rate of inflation.   In other words, some inflation is inevitable given our present market structure and the commitment of the federal government to hold unemployment rates at tolerable levels.

(16) Some people prefer the “devil theory” of inflation: “It’s all Peak Oil's fault", ”Peak Debt's fault", or the result of the “Stockpiling of Strategic Raw Materials/Industrial Metals” & Soaring Agriculture Produce.  These approaches ignore the fact that the evidence of inflation is represented by "actual" prices in the marketplace. 

(17) The "administered" prices of the world's monopolies, and or, the world’s oligarchies: would not be the "asked" prices, were they not “validated” by (MVt), i.e., “validated” by the world's Central Banks


Thu, 09/30/2010 - 22:54 | 617377 fe09rt65
fe09rt65's picture

brain's on fire

Thu, 09/30/2010 - 23:49 | 617460 Mentaliusanything
Mentaliusanything's picture

Perhaps they can send anything left over as a charity offering to The Irish


and now Spain is downgraded (again) we can sit back and relax as the 'recovery' fully takes Hold.

Fri, 10/01/2010 - 00:45 | 617519 RockyRacoon
RockyRacoon's picture

I'd say they knew well in advance of all of this:

On March 23, 2006, the Board of Governors of the Federal Reserve System will cease publication of the M3 monetary aggregate. ...

It's what they know NOW that counts.

Fri, 10/01/2010 - 01:15 | 617538 gwar5
gwar5's picture

Hide the decline, before the decline?  Of course. They knew because they caused it.

M3 has crashed to depression levels and looks very bad for them. They caused the crash of housing, and the bank crises with d/c of Glass-Steagall. Keep on eye on players like Robert Rubin adn what directions they move for what they know now.

Fri, 10/01/2010 - 05:48 | 617668 Tomash
Tomash's picture

btw has anyone recently seen Hindenburg Omen? guess not...

Fri, 10/01/2010 - 06:01 | 617673 Djirk
Djirk's picture

Funny, when you look at the 3 year(ish) chart of M2 I do not see a liquidity crisis.

Not to say there were not problems, but they appear to be in the shadow/synthetic world of the banks, not the "real" economy. What a farce.

Write it off boyz and girlz, just accounting entries, not cash flow.


I propose a new standard of measuring certain fixed income securities....mark to cash flow. If you have a security with a coupon of 6% and only have of said debtors are paying. Your face value is 50% less. Simple.



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