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M2 Update: First Decline After 16 Consecutive Increases
Typically at this time on Thursday we present our weekly Fed balance sheet update. At this point, that particular data is irrelevant as what the Fed's assets look like today, is nothing compared to what they will look like in 8 months, when the Fed will own more Treasuries than China and Japan combined. So instead we present the M2 update, where after 16 consecutive weeks of increases, M2 has finally dipped. Oddly enough, this occurs just before the Fed went balls to the well in buying EVERYTHING.
As the chart below demonstrates, as of October 25, M2 was $8,763.8 billion, a decline of $9.5 billion from the week before.
In terms of actual monetary components, the decline was predicated by a rise across all M1 items (currency, demand deposits and other checkable deposits), while of the M2 components, the only increase was at savings deposits at thrifts, while savings deposits at commercial banks, as well as small denomination time deposits and retail money funds all declined. This was surprising as this was the first decline of commercial savings accounts in over two months.
Bottom line is that none of this is relevant: unless the Fed can stop the collapse in the shadow banking system, what happens in M1 or M2 is without impact. Yet a drop in M2 is certainly not something the Fed wants to see at a time when it needs to stimulate (hyper)inflation and kill the dollar at all costs. Which is why all those who wish to see the Fed's effort fail, should not only not go out and buy worthless trinkets, but take their money out of the bank, and keep it under the mattresor better yet buy those assets which continue to outperforming stocks for a second year in a row: namely commodities and more specifically, precious metals.
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Unemployment benefits expiring... depletion of savings shall accelerate. Unless, of course, Bernanke will start buying up household IOUs
as was reported in the WSJ "the Treasury makes a profit on this trade." Pretty darn big one at that. What shall we say to that?
Does anyone agree that gold cannot be in a bubble (yet) when nearly no one has it in their portfolio? Jim Rogers made that point several months ago and Cramer brought it back up today.
Same goes for treasuries. How can they be in a bubble when they are universally hated and under-represented in portfolios?
Both of those questions are very intriguing to me. Any thoughts?
Treasuries are in a bubble because they are not yet universally hated.
Once treasuries become universally hated, people will plow into Gold, and at that point perhaps Gold will become a bubble. However, considering the relative small size of Gold relative to the size of the treasury market, Gold would go up so much, current price would look like pennies.
Gold not in a bubble. The dollar is getting smaller, not the price of gold getting bigger
Zimbabweans probably thought the price of gold was acting funny too, at first.
If even just a few people worldwide move away from a weakening dollar into gold, it would be huge.
I think that's starting to happen now
I think your premises are correct (neither gold nor Treasuries are in a bubble) but your reasoning is off. Being widely held by many investors is not a prerequisite for an asset in a bubble (see crude oil in 2006, for example - few people "owned" it, but it was driven to excessive levels and ultimately burst). Bubbles are characterized by lots of things, but one of the most critical is the propensity of investors to flip the asset. Irrational prices aren't considered as such since the speculator merely assumes he can sell quickly at a higher price. This is the greater fool theory. I don't think gold or Treasuries fit in this mold right now.
the crude oil counter-argument is a good one. i wouldn't buy gold thinking that i could flip it to another person. i do have concerns that most stock/commodity bubbles i have seen go anywhere between 7-10x, and gold has gone from $250 up to $1390. that means gold could still run up to $2500 but it also means it could be entering the danger zone.
You're not thinking about gold correctly.
Start thinking of gold as a currency, perhaps as 'goldos'.
The price of 'goldas' stays relatively stable if other currencies (dollars, euros, whatever) increase in quantity at the same average rate as the rate of increase of 'goldos'.
The rate of increase from the central bank of 'goldos', the 'mineros' is at a relatively stable 2% annually, as they have incredible discipline not to inflate the currency too fast.
What is the rate of increase of other currencies relative to 'goldos'?
...There you go!
frag-12 shot gun shells are going to be a key commodity for the upcoming storming of the White House.
...if you can get em.
$200,000,000 a day for 5 days is $1,000,000,000 in a time we have close to $14,000,000,000,000 in national debt and an unemployment rate of close to 20% (u6). Who is working for who? That's a nice vacation Mr. President.
... er ... TEN days, dontcha' know. And most of Seventh Fleet (despite how they designate). And ... horrors ... millions of coconut (potential IEDs) are being wiped out by Our most Green of Presidents.
- Ned
That's Faux News, a product of the right wing echo chamber, at least something I just saw a Navy spokesman ridicule on Teevee.
Glenn, Rush, Bachman, nobody seems sure just which of them first pulled it out of their ass, but they quckly passed it around.
Hey, I can't stand Barry. But it's not okay to just make shit up.
An Indian newspaper first reported, then Drudge and GuardianUK as secondary story
I heard crazy Bachman citing 850+ rooms at the Taj Mahal. Here's what seems like a good summary:
http://www.cbsnews.com/8301-503544_162-20021841-503544.html
What's weird about the modern onslaught of fantasy news is that the people who first misreport it never seem to feel any obligation to correct their errors as just plain errors.
As FactCheck.org notes, there is no evidence to support the $200 million figure (other than the anonymous quote), and it seems like a serious stretch in light of the fact that the entire war in Afghanistan costs less on a daily basis.
Writing about the initial report, the Wall Street Journal calls it "demonstrably incorrect" even without considering the $200 million claim.
Let's assume it's 50% of what was reported...
That would still report at $100,000,000
Justified?
Nice vacation when the people whom employ you can't find jobs and they are going to have to pay for his vacation with $5p/g gas prices.
Where would an assumption that's 50% of crazy be reasonable? And, sorry, I just can't stop: Where are you paying $5 per gallon?
LMAO! would you go for 25% of 200M, 15% of unreasonable and crazy sounds fair. As that guy just proved, if you WANT to believe something batty without a basis in reality, you will. The billionaires are feeding them whatever they want with one goal in mind: Power.
If you want to hang at ZH, you have to be skeptical of ALL politically charged propaganda from any direction. They're ALL trying to get power over you.
So ? food and gas prices dont count diddly squat.
Pls clarify that to gramps and gramma.
balls to the well.
That sounds kinda...cold!
I stuck my balls on a frozen pole as a kid. Let me tell you, it wasn't a Christmas Story.
I have some stuff I'd like to sell to the fed too but they only buy from those bastards at pimpco.
People pulling savings to frontrun Brian Sack.
Did the strikes and riots in france where they had fuel shortages scare anyone else into stocking up food? I thought this was crazy talk but realizing that a shortage of fuels could cause food to be gone in less than a day or two has made me start building a month of food up.
OMG!
I swear to god this is real. It is a documentary. "Strictly Baby Fight Club"
the first little tot is actually wearing an AIG t-shirt....I am in shock and laughing at the same time.
http://www.youtube.com/watch?v=wIhOAwAojSU&feature=player_embedded
Who'd lever up now? Sure that's what the FED wants... they want all us lemmings to get scared that they're going to inflate our currency to nothing so better borrow now while the money is still worth something. Of course M2 and M1 are many multiples of M0 and no matter how much they push M0 up, we're going to keep our money in precious metals.
Scenario 1:
I buy into the FED's marketing and purchase a house now...
3 years from now the dollar is worth nothing and I'm paying back in depreciated currency - sounds great right??
Except I've put all my savings into my house (banks won't loan without 20% - 25% down these days), and I can't sell my house, I've lost my job (economy is depression level) how am I going to make my mortgage payments - even with depreciated money??
Scenaro 2:
I hold precious metals now
3 years from now the dollar is worth nothing, but I've retained my purchasing power holding precious metals.
I'll be able to buy that house for MUCH less.
Of course the interest rates will be much higher, since NOBODY will be lending to ANYONE... but then again, I can always refinance when rates go down a couple years down the road.
Keep shoveling M0 at us Ben, we'll keep buying gold and silver. Eventually when you've printed enough money that M0 IS M2 (there is absolutely NO leverage in the system and every transaction requires cash) - and the dollar is dead, as is our economy, I'll barter some of my gold and silver for a new house.
Oil price in dollars is the controller of the US economy.
$200 per bbl oil blows this rambling wreck of an economy to smithereens.
Oil and gold never flow in the same direction. I suspect FOFA is correct that a few of the largest oil producers are settling oil in a combination of dollars and gold.
What happens when the big oil producers have all the gold and refuse settlement in fiat only? WW3?
i just put 60k into gold, physical.
a little break before the real credit bender starts
party like it's 1999
Tim Guitner lies about what they are doing..
The FBI Director does not do his job...
they must be getting paid off...
DOW/S&P500/FTSE daily and weekly overbought charts are now at an extreme level. Similar extreme conditions were detected before the correction started in mid 2007.
http://stockmarket618.wordpress.com
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