M2 Update: 14th Consecutive Weekly Increase Even As Main Street Accelerates Cash Withdrawal From Banks
The only thing mirroring the relentless outflow from stocks these days (now in their 23rd week) is the increase in the M2 money supply: the week ending October 4th was the 14th consecutive weekly increase in the broadest money aggregate compiled by the Fed which hit $8,752.4 billion, an increase of $20 billion from the $8,732.8 billion the week before. Curiously, the Fed decided to massively revise all previous numbers (as if the amount of money that goes in and out of a bank, and should be recorded electronically the second it happens is subject to change). Yet the strangest number to come out of the huge revision had to do with with the flow of money in and out of Small Denomination (under $100,000) time deposits, or in other words the place where the bulk of Main Street America parks their money for some pursuit of nominal yield. The kicker - since the beginning of the year there has not been one weekly inflow into small denomination time deposits! (go ahead and check it) It appears either the less than richest Americans need to constantly pull money out of the bank, as they give up yield (and in a Zero Interest Rate environment there is no yield to be given up) in order to pay their bills, or simply have decided to no longer keep their money with the big (and small) banks (as this includes both commercial banks and thrifts). Could the "starve the banks: campaign be working? If Americans succeed in pulling enough money from their banks via deposit redemption, coupled with the stock trading boycott, it will be the end of Wall Street post haste.
Some charts: total M1 and M2 spread by component.
Just looking at the M2 (Seasonally Adjusted):
And the weekly change in various M1 and M2 components. Note the endless weekly outflow in the abovementioned pink category: Total Small Denomination Time Deposits. The only thing that offsets this outflow is the weekly increase in Savings Deposits at Commercial Banks. Yet this is odd, as there is no incremental yield to be picked up by moving from a time deposit to a saving account. Unless this is where Americans park their money having sold Apple at $300+, desperate for a few basis points in incremental interests.
And back to the key observation on Small Denomination Time Deposits: the category which peaked at $1,460 billion in December of 2008 is now down by nearly half a trillion to $978 billion. It has not had one weekly inflow in 2010! The Fed, in coordination with various campaigns to take money away from the banks, have succeeded in depleting one of the key sources of liquidity for the banking cartel. Should savings deposits follow suit, and see a declining inflection point, it will be all over for Wall Street, which will soon be left relying exclusively on Excess Reserves and the Discount Window to fund itself.
Note the dramatic drop off in the chart below (source: St Louis Fed)