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Is The Largest Weekly Inflow Into Bank Savings Accounts On Record, A Flashing Red Alarm?

Tyler Durden's picture




 

When one thinks of America, the word "savings" is likely the last thing to come into a person's head, for the simple reason that the vast majority of Americans don't save: recall that in September the personal savings rate dipped to 3.3%, the lowest since 2009 save for one month.

On the surface this makes sense: the average US consumer, tapped out, with more spending than income, has no choice but to max out their credit card, and eat into whatever savings they may have.

This is usually as far as most contemplations on savings go. And this is a mistake, because at least according to official Fed data reported weekly as part of the H.6, which lists the data on the various components of M1 and, more importantly, M2, the real story with US savings is something totally different.

As a reminder, the H.6 lists the bank sector "liability" equivalents of the components that make up M2, which as most know comprises of M1, or physical currency in circulation at just over $1 trillion as well as Checkable and Demand deposits, amounting to $1.4 trillion, and the various M2 components which comprises of Savings Deposits, the largest component of M2 at $6.6 trillion, a modest amount of Time Deposits, and an even more modest amount of Retail Money Funds.

It is the Savings Deposits component that is of most interest. Recall that the primary definition of a savings account is, naturally, an amount of cash parked with an institution for a longer period of time, in exchange for receiving interest (or no interest in the era of The Great Chairman), which also have a limitation on the number of withdrawals: six per month at last check. Savings accounts also encompass the broader Money Market account category, which has a higher floor requirement than an ordinary savings account. 

At first blush one would balk at the concept of a Savings Account in the New Normal: after all who in their right mind would face the counterparty risk associated with having money in a bank, especially money that has withdrawal limitations, if there is nothing to be gained in exchange, because under ZIRP nobody collects any interest, and won't until the system finally collapses.

Well prepare to be surprised.

The chart below shows the time progression of the largest Savings Component: total Savings Deposits at Commercial Banks, which at $5.6 trillion in the week ended November 5, 2012, is also the largest single component of M2, and thus broader money stock of the US (accessible source data via the St Louis Fed).

The chart above hardly shows any slowing down in cash entering Savings Accounts. In fact, quite the opposite. As we have conveniently highlighted, the historic rate of growth in this category of about $200 billion per year, aka the "pre-New Normal" regime, nearly quadrupled to just shy of $700 billion, with a distinct break when Lehman failed aka the "post-New Normal". That's $700 billion per year entering what the Fed defines as a "Savings Account." And all it took to get everyone to scramble to the uncompensated safety of savings accounts? A near collapse of the entire financial system!

This topic alone is worthy of a far greater discussion, because there is a distinct possibility that what the Fed discloses as a "savings account" book entry may simply be a book entry "plug" at the bank level to account for the surge in Excess Reserves into the banking system, after applying an appropriate reserve discounting factor: one way of thinking of M2 is the full lay out of the monetary system using base currency and Fed Excess Reserves and applying a Fractional Reserve banking multiplier. At last check the, multiplier from currency outstanding (1.08 trillion) to total M2 ($10.3 trillion) was 9.5x, in line with the historic ratio of ~10x.

A better representation of the very tight correlation between M1, which captures both currency and physical excess reserves, and M2 can be seen on the chart below.

As can be seen M1 is M2 just with a multiplier factor of ~4.5x.

What has been unsaid so far, is that to Ben Bernanke and the champions of the status quo, money in Savings Accounts would be far better used if it were to be dumped into stocks. After all, the primary reason for the urge by the Group of 30, Tim Geithner, Bernanke and the SEC to crush money markets and to make them even more uneconomical is to pull all the cash contained there and to have it invested into bonds, stocks, and other risky products.

In summary, the more money allocated to Savings Accounts, the more Bernanke's attempts to rekindle the "animal spirits" fail. And while this cash is at least on the surface what is known as "money on the sidelines", the flipside also is that should this money ever leave the "sidelines", modestly at first, then all at once, then the Fed's moment of reckoning will come, as that will be the moment when the Fed's ability to keep inflation grounded in "15 minutes" or less, will be thoroughly tested.

Paradoxically, Bernanke wants this money to re-enter the risk markets, and/or the economy, but not in a way that leads to hyperinflation. After all there is $10 trillion in electronic "money" in the US system, and only $1 trillion in cold, hard cash available for cash claims satisfaction.

All that brings us to the topic of today's post: weekly changes in the amount of cash held in Savings Deposits at Commercial Banks. As the chart below shows, rapid, dramatic shifts, characterized by massive inflows of cash into such savings accounts usually coincide with times of great monetary stress: the three biggest episodes in history to date have been the 2008 Lehman failure, the August 2011 Debt Ceiling Crisis and associated US downgrade, and the May 2009 First Greek failure and bailout. 

Those three episodes represent the biggest weekly Savings Deposits inflows number 2 through 4.

When was the largest ever inflow into Savings Deposits at Commercial banks, at $131.9 billion in one week? This past week.

Why?

We don't know, but the people who control $5.6 trillion in US commercial bank savings deposits - certainly not the vast majority of the US population who have virtually no money saved up, but the true 1% - just decided to park the most cash on a week over week basis into their savings accounts in history.

Perhaps ask them why they did it...

Source: H.6

 

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Tue, 11/20/2012 - 20:56 | 3000562 Zero Govt
Zero Govt's picture

Kito  -  you'd have 6 months cash outside the bank ....er, why not all of it?

anytime you need to pay a bill you stick the cash in a day before. 

Tue, 11/20/2012 - 21:03 | 3000583 fonzannoon
fonzannoon's picture

I would imagine if Kito or anyone else had any sort of business then they would need to maintain business checking accounts. Those accounts have to have minimum average balances othersiwise they get fee'd out the ass.

Just a guess.

Tue, 11/20/2012 - 21:18 | 3000623 kito
kito's picture

my point was that most people on zh eschew the idea of holding significant amounts of cash.....that its a losing proposition......so my advice for pm advocates such as fonzman is to have at least that much outside the system............shirley one could hold more if one desires...............

Tue, 11/20/2012 - 21:25 | 3000629 fonzannoon
fonzannoon's picture

Two years of friendship on this site and you are still calling me Shriley :)

I will be looking into this Hunterdon and Bucks county. Thanks for the heads up

Tue, 11/20/2012 - 21:49 | 3000733 kito
kito's picture

anytime fonzman!!!

Wed, 11/21/2012 - 08:33 | 3001514 TuesdayBen
TuesdayBen's picture

Hotel room

Wed, 11/21/2012 - 08:56 | 3001554 Cui Bono
Cui Bono's picture

How did he go to the bathroom with all that shit on?

Don't OG Bitchezzzzzzzzzzz

Wed, 11/21/2012 - 05:18 | 3001357 slackrabbit
slackrabbit's picture

A good preppers grab bag should have both, because you never know which way it could go!

Personally I think they will print, but they may decide just to let it crash and stave the peasants....I wouldn't put it past them. 

Thu, 11/22/2012 - 09:25 | 3004277 e-recep
e-recep's picture

what could they do instead? buy gold and bury it somewhere in the company campus? it may work though for some hillbilly in the middle of nowhere but what can the urban person living in an apartment or condo do? nothing.

take it out of the banking system? easier said than done.

Tue, 11/20/2012 - 18:04 | 3000085 Edmond Dantes
Edmond Dantes's picture

Of course, the irony of the story is, these are precisely the times when you should be taking your money OUT of the bank.

Tue, 11/20/2012 - 18:24 | 3000154 JPM Hater001
JPM Hater001's picture

Horse meet burning barn.

Tue, 11/20/2012 - 19:06 | 3000259 greensnacks
greensnacks's picture

Media keeps yammering on about cliffs and many are saving up to buy parachutes.

Tue, 11/20/2012 - 18:06 | 3000089 buzzsaw99
buzzsaw99's picture

the bernank wants everyone to buy bullshit stocks and zh thinks everyone should buy gold. name calling won't get either one of you what you want. :P

Tue, 11/20/2012 - 18:08 | 3000093 A Lunatic
A Lunatic's picture

I was going to put all of my extra money in savings today, however being hungry at the time, I instead splurged on a pizza and a side of cheesy bread sticks........

Tue, 11/20/2012 - 18:30 | 3000165 SokPOTUS
SokPOTUS's picture

Man, have I got a Death Panel for *you*...

Tue, 11/20/2012 - 18:19 | 3000096 fockewulf190
fockewulf190's picture

Hmm..my guess is that they all got a serious case of the chicken shits before turkey day.  Not to mention Obama won and as a result the markets have had economic cholera over the past week or so

Tue, 11/20/2012 - 19:16 | 3000289 knukles
knukles's picture

Markets going down have nothing to do with the Second Coming of the Messiah... it's all Greek's fault.
          -CNBS

Tue, 11/20/2012 - 18:09 | 3000098 max2205
max2205's picture

They know. It's in the wind

Tue, 11/20/2012 - 18:10 | 3000100 chdwlch1
chdwlch1's picture

Can't leverage reserves held at the Fed...they first need to be leveraged 10:1 by being deposited at the TBTFs...then the TBTFs can leverage the 10X deposits by 40:1 (ala MF Global) in the derivatives market.  $1.00 of excess reserves becomes $400.00 worth of manipulation powder to play with.  Question is, what's coming that they're gonna need all that powder for?  Debt ceiling, Dec. 12 PM options expiry, Spanish default?  Too many possibilities to choose from....

Tue, 11/20/2012 - 18:16 | 3000120 fonzannoon
fonzannoon's picture

Or maybe none of the above. Maybe rich people don't give a shit about interest. Maybe they have this thing so rigged in their favor that their income and principal savings is enough. Maybe they don't need or want to take any risk. So many arbitrary dates and events have come and gone since I have been on here it has become groundhog day. But if you are high enough up you throw your money in the bank, head to Anguilla for the holiday and start prepping for your new years bash.

Tue, 11/20/2012 - 18:14 | 3000110 jballz
jballz's picture

 

 Israel may need a big news story to get the ball rolling down Iran's gullet. By Israel I probably mean uncle Mic, I don't really know. So don't have me killed. Just sayin, between well heeled Jews in the know and your average pissed off Romney-ite dumping assets to post capital gains afore the fiscal cliff, those two factors would do it.

My other guess is people are still pissed about the apple map fiasco.

 

Tue, 11/20/2012 - 18:15 | 3000113 max2205
max2205's picture

How much went to credit unions?

Tue, 11/20/2012 - 18:15 | 3000115 IrritableBowels
IrritableBowels's picture

Riding home from work the other day, NPR says consumer confidence is on the rise due to more people using their CC's.

 

Mffer, what?

Tue, 11/20/2012 - 18:15 | 3000118 WhiteNight123129
WhiteNight123129's picture

 The end of FDIC insurance should some interesting implications on January 1st 2013. How would hte short end of hte curve look like in that instance?

 

Tue, 11/20/2012 - 18:23 | 3000150 SMG
SMG's picture

The current $250K limit goes back to $100K on Jan 1st, 2014.

http://www.fdic.gov/news/news/press/2010/pr10161.html

Tue, 11/20/2012 - 23:02 | 3000928 Mary Wilbur
Mary Wilbur's picture

Thanks. I didn't know this.

Wed, 11/21/2012 - 00:56 | 3001205 Just Ice
Just Ice's picture

The $250k FDIC limit per account was made permanent as part of Dodd Frank legislation.  There is no reversion of it back to $100k.  It was initially put in as a temporary measure then extended, again as temporary measure but finally made permanent.

The FDIC unlimited insurance for non-interest bearing accounts (primarily so that business checking and payroll type accounts would not become part of any bank run seeking safety during 2008 financial crisis) does revert back to limited coverage per account, however ($250k).

 

Wed, 11/21/2012 - 01:23 | 3001236 Manic by Proxy
Manic by Proxy's picture

But it will still be backed by the full faith and credit of the U.S. Government, so safety is assured. Why worry? Wait - does FDIC stand for Fucking Dipshits In Charge?

Tue, 11/20/2012 - 18:16 | 3000121 Mrmojorisin515
Mrmojorisin515's picture

War mayhaps?

Tue, 11/20/2012 - 18:21 | 3000139 DrunkenPleb
DrunkenPleb's picture

I'd bet a shiny silver ounce that a significant fraction of it was driven by profit-taking on crAAPL.

Tue, 11/20/2012 - 18:20 | 3000140 yabyum
yabyum's picture

As threatened before, I took my 401k out of Wells Fargo today. Now where to park the money??

Tue, 11/20/2012 - 21:48 | 3000730 Ginsengbull
Ginsengbull's picture

Shotguns and canned goods.

Tue, 11/20/2012 - 18:21 | 3000143 zorba THE GREEK
zorba THE GREEK's picture

Your money is as safe in a bank as a new flat screen TV is in an apartment

in West Philadelphia.

Tue, 11/20/2012 - 18:22 | 3000147 Frastric
Frastric's picture

Something bigger than Lehman, Greece, Debt Ceiling and the Fiscal Cliff combined coming our way? Holy shit!

Tue, 11/20/2012 - 18:25 | 3000156 fonzannoon
fonzannoon's picture

The fiscal fart is coming our way. That's probably about it.

Tue, 11/20/2012 - 18:29 | 3000162 Esso
Esso's picture

$131.9 billion would be over $500 per citizen. Gotta be the 1%ers up to something.

Tue, 11/20/2012 - 22:34 | 3000862 CPL
CPL's picture

Good point.

 

Heading to high ground of savings.  They can't be that stupid though to be throwing their time in a bank. 

Tue, 11/20/2012 - 18:29 | 3000163 miker
miker's picture

If you're  wealthy, you put some in physical gold/silver at home or the woodshed.  You keep a bunch of cash on hand too.  But you don't keep 500K of cash or gold sitting at home.  So much of it ends up in FDIC accounts.  Of course if everything collapses, losing that bit of money won't matter anyway.

Tue, 11/20/2012 - 18:37 | 3000178 combatsnoopy
combatsnoopy's picture

Didn't Soros just buy a pot of gold?  He should've spent that money to get his civilian Palestinian peeps evacuated from a warzone. 

Tue, 11/20/2012 - 18:38 | 3000180 zilverreiger
zilverreiger's picture

Maybe its for thanksgiving turkey? or black friday / xmass

Tue, 11/20/2012 - 18:47 | 3000208 Angus McHugepenis
Angus McHugepenis's picture

Wow... gold just crashed hard in the past few minutes. At $1,700, down about $33. Silver remains surprisingly plucky at $33.18

Anyone else see that?

Tue, 11/20/2012 - 18:48 | 3000215 fonzannoon
fonzannoon's picture

no i see gold either at 1723 or 1728 depending on where I look. Where are you looking?

Tue, 11/20/2012 - 18:57 | 3000230 Angus McHugepenis
Angus McHugepenis's picture

fonz - sorry... I use Albern Coins link and it has now corrected to $1,728. The silver price was still not affected during this. Wish I had taken a screen shot. They don't use a Kitco feed. I can't remember who they use. They are my local coin dealer and certified by the Canadian Mint.

Tue, 11/20/2012 - 19:00 | 3000238 fonzannoon
fonzannoon's picture

No worries.

Tue, 11/20/2012 - 19:14 | 3000284 Angus McHugepenis
Angus McHugepenis's picture

Even freakier, the bid was at $1,698. Again, I wish I had taken a screen shot. I like a drink but I've never been drunk enough to slur my numericals.

Tue, 11/20/2012 - 20:32 | 3000465 PhattyBuoy
Tue, 11/20/2012 - 19:18 | 3000294 Pareto
Pareto's picture

Albern Coins:  Yeah I talked to these guys, but, wasn't long before I hung up.  For every ounce of anything they sell you, they register the transaction along with your name and social insurance number (pending quantity).  I asked him "whats the government got to do with this."  They said all our transactions are registered so that if the PM's you bought gain in nominal value, then you pay tax, should you decide to crystalize those gains."  So, I asked, "hey this is not an investment, since I do not get paid anything to wait, rather, this is a currency hedge.....why should I be paying tax on nominal gains when in real terms the silver or gold still buys me the same shit that it did when its nominal price was lower?"  "PM's don't pay me to wait.  There are no real gains, so whats the government got to do with it?"  He said, "Well we don't feel we ought to be dealing with your kind of people."  I said, "fine by me, because I sure as fuck don't want anything to do with you."  He was a beligerant prick, and clearly UNINFORMED, about the reasons why you hold PMs.  And I am sure that he probably charges GST as well.  Maybe you have a different relationship with these guys, but, my recommendation is to stay as far away from them as absolutely possible.  I will close by asking you simply this: "why would you ever let the government (or anybody else for that matter)  know you have wealth stored in a commodity that can be traced, taxed, and confiscated?"  RP 2016! Peace

Tue, 11/20/2012 - 19:31 | 3000320 Angus McHugepenis
Angus McHugepenis's picture

Pareto - Simple answer... I have never walked into their shop or even placed a phone call to them because I know how they operate at that level. To me they are the source supply locally because they have the buying power and access to the Mint.

Anything else you want to know will cost you 2 silver Grizzlys.

Cheers.

Tue, 11/20/2012 - 20:00 | 3000390 Sockeye
Sockeye's picture

You have a SIN pay Goods & Service Tax and plan to vote Ron Paul in 2016? What country is that? (I'd like to move there!)

Tue, 11/20/2012 - 20:17 | 3000428 Angus McHugepenis
Angus McHugepenis's picture

Sockeye: I picked up on the RP2016 thing also. Not sure what that has to do with Canada. Won't RP be about 104 years old by then? Can they prop him up for another failed round as the GOP candidate in 2016?

As for paying GST and showing SIN, only idiots and priests do that.

Tue, 11/20/2012 - 21:51 | 3000741 Pareto
Pareto's picture

To both:  RP 2016 is, I suppose, my way of paying homage to a great thinker and practitioner of Austrian economics.  Yes, I know he won't ever run again, but, it is my hope that somebody like him one day does.  And its a bit naive to think that American monetary policy has no effect on Canadian monetary policy.  In the western world's currency race to the bottom Carney is doing a wonderful job of keeping up with the Jones on monetary policy, fleecing my real disposable income through near ZIRP and the capital distortions that have inevitably followed.  In short, we will have our own unwinding demons to deal with here in Canada along with the deliterious economic consequences that will necessarily follow.  Only idiots might believe otherwise.

Tue, 11/20/2012 - 22:09 | 3000797 Sockeye
Sockeye's picture

I like your RP sentiment, and you are correct, FED monetary policy affects BoC policy. Actually it's more dictated than affected. Maybe we can convince RP to move up here and run against PET's son!

Tue, 11/20/2012 - 22:39 | 3000871 Pareto
Pareto's picture

I have actually heard government workers talk about how "wonderful it would be" if PET's son ran.  I wanted to punch them in the face.  This would inevitably and immediately create a class war in Canada.  Our economy would tank over night.  I'd be looking to move.  cheers. 

Thu, 11/22/2012 - 00:04 | 3003916 Angus McHugepenis
Angus McHugepenis's picture

You are looking for somebody you can follow and dictate how you live. I'm looking to rid myself of those chains. I don't care if Ron Paul is the Second Coming.

Bankster controlled money is just another link in your chains.

I couldn't give less of a fuck about Mark Carney. Nothing he does affects me. I love taking his shitty paper and converting it to silver/gold/food.

Tue, 11/20/2012 - 18:55 | 3000223 zilverreiger
zilverreiger's picture

1728 ish here also forexpros

Tue, 11/20/2012 - 19:17 | 3000291 seek
seek's picture

I saw it to. It's still on the charts at http://www.goldprice.org/spot-gold.html

Massive down spike to $1699 for a minute or two, then back to normal. Either a glitch or someone was trying to see if they could trigger stop losses.

I swear, the last 4-6 weeks I've been seen HFT-type antics on AU. Something weirder than the usual weird is going on.

Tue, 11/20/2012 - 19:40 | 3000344 Angus McHugepenis
Angus McHugepenis's picture

Seek: Glad I'm not the only one who saw that. Thanks for confirming it.

Tue, 11/20/2012 - 23:42 | 3001039 seek
seek's picture

It happened when only Sydney was open -- it stayed on the plot for a few hours, I just checked goldprice.org again and it's gone.

Feed glitch or one stray trade? Who knows.

Tue, 12/18/2012 - 05:45 | 3074120 MeelionDollerBogus
MeelionDollerBogus's picture

"crashed hard" is a move exceeding $100/oz. Anything else is a yawn.

2012 apr 17 gold ROC trends | 52week ROC gold to 2400/oz

roc 52 week monitor $gold

goldpricemodel 2013 roc 52-week

goldpricemodel 2013 projection

Be ready for 1600 gold. Be ready for 1500 gold. It won't stick, it may trade in hours you're asleep to do it, but if you can snag it before the rise that would be mint. That rise will take it to 2000. People will complain how flat it is range-bound at 1900 to 2100 and by September you'll see 2400. There's some slippage possible in the slope of the rate of change meaning possibly it could be 2700/oz not 2400 but we'll see what time shows for more filling in of the extrapolation.

Tue, 11/20/2012 - 18:47 | 3000212 shanearthur
shanearthur's picture

Seriously, my aunt read this http://www.nationalseniorscouncil.org/index.php?option=com_content&view=... then asked me if she should put her money into a savings account. I told her I'm no financial expert, but I'd buy at least some hard assets (gold and silver to store at home in a safe, long-term food storage, etc). But, I have no such gold/silver investments yet, so what is the wise thing to tell her? Tell her to buy some junk silver/gold coins at a local dealer? Anybody have a reputable website where she could go to find some regional/local gold/silver junk sellers? I'm assuming she'd probably want junk silver and not some 30k bars as she probably would only spend 5-10 k on this new option.

Tue, 11/20/2012 - 18:57 | 3000232 yabyum
yabyum's picture

Junk silver for the win.

Tue, 11/20/2012 - 20:18 | 3000429 AGuy
AGuy's picture

FWIW: If the sieze 401Ks and pensions, you can bet your last silver dollar they will also go after PMs. I suspect at some point in the future they will enact an 90% capital gains tax on PMs, or simply make private ownership of PMs illegal for americans (ie FDR's 1933 act). While hording\burying is a option, it will have to stay there until after the US gov't collapses. I am sure the gov't will offer good whistleblower rewards to turn in your neighbors hording PMs. You can bet when people get desperate, they'll trade their children for an EBT.

Probably the best use is to buy rural land, build an energy efficent small home and live there. Urban areas that will become saturated in violent crime and depression.

 

Wed, 11/21/2012 - 00:19 | 3001134 Encroaching Darkness
Encroaching Darkness's picture

" While hording\burying is a option, it will have to stay there until after the US gov't collapses."

Well, it's not like you're asking us to wait for a LONG time! Once the takers overwhelm the makers, it's likely only to last for a few months......

Wed, 11/21/2012 - 03:40 | 3001321 SilverSavant
SilverSavant's picture

I keep seeing people talk about the siezure of PM's.   WTF!!!  These people must have sat on the toilet too long and lost the least of their brains.   When you buy PM's your aim should be to  buy privacy.   You buy something that drops off the radar.  You are getting out of the freaking banking system and starting your own banks and determine your own reporting requirements.   Are you really going to buy PM's and leave them in the system.  Maybe you should stay off the toilet for a few weeks and build up some reserves.

Tue, 12/18/2012 - 04:09 | 3074067 bunnyswanson
bunnyswanson's picture

If you have gold, and the currency collapse occurs, won't you go to the pawnshop and sell it?  That is how they will get your gold and silver collection.  Keeping gold prices down right now is beneficial for that reason.  When it is all in the hands of the bankers, et al, the price will rise to a price no one will be able to afford.  This may take a decade but I think that is what will happen when I consider it.

Tue, 12/18/2012 - 05:38 | 3074105 MeelionDollerBogus
MeelionDollerBogus's picture

I sure as hell won't. I'll barter my gold & silver for things that aren't gold & silver that I need. Otherwise I'll pretend I have no idea what gold & silver is - to the point it's a credibly ploy with the other party.

Tue, 12/18/2012 - 05:34 | 3074063 MeelionDollerBogus
MeelionDollerBogus's picture

any land can be annexed. You can't carry it with you. I don't care if it's 1000000% tax on gold & silver - you'll never see it in my hand. It's easily portable & I've been watching Penn & Teller to better understand how banking works.

Tue, 11/20/2012 - 21:29 | 3000574 Jugdish
Jugdish's picture

Tell her to front you some money for booze, hookers, and a pack of smokes.

Tue, 11/20/2012 - 23:46 | 3001047 Encroaching Darkness
Encroaching Darkness's picture

Not aware of a regional gold / silver dealer website. Have had good luck with:

Gainesville Coins (FL)

Rust Rare Coins (UT)

Investment Rarities (MN)

If you can give us an idea where your aunt may be looking, someone might have a suggestion.

 

Tue, 11/20/2012 - 18:55 | 3000225 abgary1
abgary1's picture

Thanks to the central banks and the speculation of TBTF banks, both the HY bond and stock markets are overvalued for the current economic conditions. There has been a sell off in both recently and it looks like the proceeds are going into savings and probably also into gold . 

Tue, 11/20/2012 - 19:01 | 3000244 drumpoint
drumpoint's picture

Gifts to Mitt Romney

Tue, 11/20/2012 - 19:03 | 3000253 AUD
AUD's picture

If you go here

http://www.rbz.co.zw/publications/monthlyeb.asp

& can work through the mumbo jumbo, you'll see a rabid increase in all sorts of monetary aggregates up until 2008.

Tue, 11/20/2012 - 19:34 | 3000335 magpie
magpie's picture

but what does one do with a central bank without a mission

Tue, 11/20/2012 - 19:08 | 3000262 gitta4437
gitta4437's picture

the 1% know that Obama's reelection means higher taxes, whether it's the fiscal cliff, some "compromise", and the new taxes coming from Obamacare....more money in the government's hands means less money in the markets to hold up asset prices.  They are just trying to preserve the value of what $$ they have by getting out of the market early (and putting it into savings accts), before Obama scoops up part of it.......seems kind of simplistic, but i really think that might be it.........

Tue, 11/20/2012 - 20:42 | 3000275 sitenine
sitenine's picture

Why did they do it?  Risk aversion,  obviously.  'Investors' are, contrary to popular belief, rational beings (certain idiots and rogue algos aside), and they understand very well what coercive factors are at play.  Absent economic growth, massive reserves are going to be needed just to stay in business over the next decade or so, and who out there is actually predicting 'normal' growth?  Another note of interest is that these reserve buildups not only hedge against recession, but they also predict inflation - logically, the larger the reserve base when it starts being used in earnest, the higher the inflation will be.  The Fed will try to stop inflation, and that's actually the fear that drives the cash hoarding.  Think about it - if rates go to 10%+ (and they will eventually!) the hoarders go to cash over credit.  Thus, IMHO, our 'fragile recovery' and increased 'savings' are nothing more than a setup for immense pain, and right soon.

[edit] I rethought this a little, and I tried to place it in historical context, and then it really hit me.  There is nothing to compare this debt orgy we are going through with.  These debt levels are mindblowingly larger than what we can ever pay ourselves, so I'm uncertain about inflation possibilities...  Help.

Tue, 11/20/2012 - 19:13 | 3000282 IllusionOfChoice
IllusionOfChoice's picture

Is this people stashing money for Christmas presents? Seems like that money would be coming out for black friday sales instead. Most odd indeed.

Tue, 11/20/2012 - 19:15 | 3000285 monad
monad's picture

<== This is a typo

<== People are this stupid

Tue, 11/20/2012 - 19:22 | 3000303 Shizzmoney
Shizzmoney's picture

What an important graph.  Thanks for posting this, ZH.

What's funny is, that since Obama got elected, the rich (i.e. old white people) have been pulling their money out of stocks left and right.  I knew a guy at work who pulled out his 401K the week of the election (b/c obv Obama was gonna win), a substantial amount, just b/c he figured that Obama wins = market tanks.  (The stock at our company has lost 20% since he won, too).  The market probably would of tanked under Romney, just after a minor spike to 14K. 

What's funny though is all of these rich short sighted oldbirds are putting that money into banks, even at ZIRP interest, because they feel its "protected" by the government (the same one they hate b/c it's percieved to be "run" by a colored man).  All this not knowing that their deposits, like at Bank of America, are actually being used as collateral for their CDOs.  #lulz

But that's how fooled the people with the majority of the money are.  They have no idea it is centra lbankers who control the spigot, not the government.  The government is just the middle man and the bodyguard.

In a sense, Gerald Celente had it right...its probably better for Obama to win, that way we get our crash earlier, people lose their savings, their 401Ks, and we finally stop focusing on money, and focusing on building a better society that isn't run by ideological dickbags.

Ironically I already had this planned: after reading this article, I went to my bank and took out all the money I had in my checking account (as I usually do every payday), minus maybe 50 bucks (just to keep the account active).  I advise those who don't have the ballerish money these hedge fund guys have, to do the same, and buy some silver toons with 5-10% of it.

When SHTF, you'll be glad you did. 

Tue, 11/20/2012 - 19:32 | 3000331 Tyler Durden
Tyler Durden's picture

Remember this chart which explained where JPM's CIO got the cash to blow up so spectacularly?

That's right: every dollar in "savings", and other bank deposits, is used by the banks to fund prop trading.

Because if the savers aren't gambling, the bank will gladly do it for them in this brave new age of ZIRP where Net Interest Margin is zero, the traditional bank model is long dead and buried, and where banks can only make money by daytrading stocks and selling IG9.

Luckily there is always the FDIC and "depositor insurance."

Tue, 11/20/2012 - 20:22 | 3000441 AGuy
AGuy's picture

 "Luckily there is always the FDIC and "depositor insurance."

And the Fed, which insured $23 Trillion held in Money market accounts shortly after the Lehman collapse. The Fed provides all of the real insurance.

 

Tue, 11/20/2012 - 20:49 | 3000533 sitenine
sitenine's picture

"That's right: every dollar in "savings", and other bank deposits, is used by the banks to fund prop trading."

Wouldn't that be a violation of rules governing segregated accounts?

Surely MF Global was the only one doing it.  Surely...

Wed, 11/21/2012 - 01:41 | 3001258 Just Ice
Just Ice's picture

Bank accounts are basically a loan to the bank of the money deposited, at whatever interest the bank pays on the account, to do with as they please.  They can use the funds to make subprime loans or to prop trade.  The bank account becomes another of the bank's liabilities, i.e. they are liable to the account holder to pay back the loaned (deposited) funds upon demand, (although notice can be required as part of the account's terms it usually isn't).

Requirements for segregated funds apply to accounts opened with brokerage firms as the broker is not supposed to be co-mingling the money of clients with their own and using it for their own benefit rather than the client's.

Wed, 11/21/2012 - 12:20 | 3002153 sitenine
sitenine's picture

That's why I advocate for a return to Glass-Steagall. If I gave $1, 000 to my friend Joe for safe keeping and he used it to gamble with, I would promptly kick his ass. We let banks do it because why again exactly? Because it's a fucking rigged game! That's why! Even when THEIR bets with MY money go bad, I'm asked to bail them out again! I'm sick of it.

Tue, 11/20/2012 - 19:25 | 3000313 pragmatic hobo
pragmatic hobo's picture

probably people cashing out their stocks before capital gains tax increase.

Tue, 11/20/2012 - 19:48 | 3000362 Tuna Trader
Tuna Trader's picture

This is rather obvious. Not every investor is a Buffett or a Soros. Most with wealth to invest are conservatives. The reelection of Obama was rightfully seen as a determent to the economy. Are they dumb for trusting their deposits in FDIC insured banks? Yes. Do most investors (wealthy individuals who tend to be conservative) read ZeroHedge? No. They think they're riding out the economic storm they keep hearing about listening to Glenn Beck commercials. 

Tue, 11/20/2012 - 22:09 | 3000795 BORT
BORT's picture

Get out, and then plan on what to do with it.  It takes time to plan

Tue, 11/20/2012 - 20:15 | 3000403 ekm
ekm's picture

Pretty easy answer.

The Fed and Gov want people to rekindle the animal spirits, very true. The problem is that the Fed wants people to buy stocks at extremely high prices. What makes it worse is that people have learned the trick and still remember 2008 very vividly.

 

So Fed + Primary Dealers started buying securities at S&P 666 in 2009. Buy and buy - nobody coming

Buy again into 2010 - nobody coming. Stock prices go higher. 

Well, buy again in 2011 - nobody coming. Buy again 2012 -nobody coming.

 

``Money in the sidelines`` is another idiotic expression. Money will leave the sidelines when................the price is right. Money can't leave the sidelines when the stocks are resting at Primary Dealer's inventories at S&P 1400.

 

Conclusion: The higher the stocks (located in primary dealer's inventories), the higher the savings deposits.

Why is this so difficult to understand? If tomatos have high prices, people buy no tomatos. If tomatos have low prices, people buy tomatos. So difficult to understand, oh so difficult.

 

Tue, 11/20/2012 - 21:18 | 3000624 Imminent Crucible
Imminent Crucible's picture

It is difficult to understand if you don't know the difference between a consumption good and an investment good. Consumables become less desirable as the price rises. Investments (think gold or stocks) become more desirable as the price rises. See "Geffin good" for a better understanding.

Wed, 11/21/2012 - 06:21 | 3001389 Awakened Sheeple
Awakened Sheeple's picture

Equities in this new normal are NOT a Geffin good. Lots of sheeple I know are selling strength and quietly heading for the exits.

Bonds + savings are the new Geffin good. Which is focking scary.

One more equities crash, then the unwind out of currency will be blinding.

Tue, 11/20/2012 - 20:12 | 3000411 strangeglove
strangeglove's picture

Call it Tax planning before the end of year increase in rates. Which means the crash is set to start 12-31-2012. Buckle up kids they buyers are going on strike.

Tue, 11/20/2012 - 20:35 | 3000412 The Gooch
The Gooch's picture

It's all one BIG FUCKING ALARM (!) these days. 

Option 1:Run To The Hills

Option 2: Order pizza (for your family and enjoy it together)

Tue, 11/20/2012 - 20:15 | 3000424 Quantum Nucleonics
Quantum Nucleonics's picture

The increase in bank savings deposits shouldn't be a surprise to anyone.  The cause is pretty clear.  When Lehman failed and the Reserve Fund broke the buck the herd of sheep realized money market funds were a lot riskier than they thought.  The entire money market fund complex was a day or two away from imploding when the Fed jumped in to "insure" the industry.  At the same time, the "insurance" for bank deposits was increased.

As to this week's big increase, note that there is renewed talk of forcing money fund share prices to float.  As soon as that happens, all hands abandon the good ship money market fund and set sail for your nearest FDIC insured savings bank.  Note the implications for a tectonic shift in short term corporate financing from the wall street money fund complex to a handful of TBTF banks.

Tue, 11/20/2012 - 20:29 | 3000456 Quinvarius
Quinvarius's picture

I am going to go out on a limb and say that as long as the public is not in the market and scared...bullish!

 

Tue, 11/20/2012 - 20:43 | 3000510 ZFiNX
ZFiNX's picture

4.5 Billion years is a long enough time to have self-destruction programmed into your genes. It would suit the observable equilibrium, anyway.

Tue, 11/20/2012 - 20:50 | 3000541 carlnpa
carlnpa's picture

Simply.

That is what millions of people giving a big FU to the system looks like following the election.

I know several people that have cashed out of everything because they are PISSED at the last election results and choices.

This is what millions of people voting with thier money looks like.

Fight club is on - TPTB don't even realize it.

Tue, 11/20/2012 - 20:55 | 3000555 jomama
jomama's picture

uhm, that's a little far-flung for someone even the likes of me to believe.

Tue, 11/20/2012 - 21:02 | 3000579 carlnpa
carlnpa's picture

We'll see.

I live in a rural area, I'm not exaggerating. 

The patsies have woken up.

Tue, 11/20/2012 - 21:02 | 3000580 rsnoble
rsnoble's picture

Solar flare assholes.

Tue, 11/20/2012 - 21:07 | 3000596 The Gooch
The Gooch's picture

Spray some windex on it.

Tue, 11/20/2012 - 21:04 | 3000586 stant
stant's picture

dang that dosent include mason jar federal!!

Tue, 11/20/2012 - 21:15 | 3000617 Monedas
Monedas's picture

Speaking of banks .... Monedas to Earth .... IDF bombs bank where Hamas gets paid .... anyone have a problem with that .... Crockett ?  LOL 

Tue, 11/20/2012 - 22:13 | 3000807 jomama
jomama's picture

your 'jihad' comedy tour was funny until I realized you aren't joking.

Tue, 11/20/2012 - 21:29 | 3000668 RunningMan
RunningMan's picture

This is easily explained. As rates dropped, money flowed out of term deposits (CDs) and rotated into MMDAs (the savings accounts), some of which had higher rates paid. Why? They are technically inderterminate maturity (meaning they have no specific tenor). So when CDs matured, they parked the cash in a savings account.

No alarm here, other than the fact that fixed income savers are screwed. And middle America often used CDs for retirement savings, a concept which is now dead. Good luck finding a replacement.

Tue, 11/20/2012 - 22:38 | 3000870 Fíréan
Fíréan's picture

How would you know if some, or a part , of these funds entering "savings accounts" were  technically ïllegal" sourced fund,s, or skimmed off , being laundered as that's what the major banks have been found to engage in, such practices and beyond sever reproach ? Seeing as even the author is unable to source the origin.    There's lot of otherwise unaccounted mega dollars of cash floating around the these days . . .

Tue, 11/20/2012 - 22:08 | 3000785 optimator
optimator's picture

When you close out that IRA/401K what are you going to do with the check(s)?  Deposit it in a bank while you figure out what to do with it.  Then, out of the bank and into the only safe place, gold.  Can't do it all at once of course.  I still get pissed when the bank asks, "What are you going to do with the money?".

Tue, 11/20/2012 - 22:35 | 3000863 Quantum Future
Quantum Future's picture

That's what i think. Cash in your IRA chips now before it's too late.

 

QF

Wed, 11/21/2012 - 00:21 | 3001138 Freewheelin Franklin
Freewheelin Franklin's picture

"What are you going to do with the money?".

 

I'm going to buy bitcoins, bitchez.

Tue, 11/20/2012 - 22:09 | 3000793 q99x2
q99x2's picture

AAPL and dumping out of FB into cash.

Tue, 11/20/2012 - 22:24 | 3000839 jcmjr
jcmjr's picture

5 simple reasons:

1) Cap gains taxes going to 25%

2) Dividend taxes increasing to up to 43%

3) All tax rates to increase in 2013

4) O'care taxes take effect

5) The market is a charade

Tue, 11/20/2012 - 22:28 | 3000847 andrewp111
andrewp111's picture

It is nothing more than tax-related selling by the  1%ers. Their cap gains taxes are guaranteed to go way up next year, so they might as well sell their winners now, especially if the market is dropping.

Tue, 11/20/2012 - 22:28 | 3000848 Kreditanstalt
Kreditanstalt's picture

This is surreal...!

Why the hell would anyone want money in an account these days?  Pays nothing.  Easily tracked by government.  Eaten by inflation.  But OTOH, never understate the craven desire of the hoi polloi - or those "managing" their funds - for "security" at any cost...

Tue, 11/20/2012 - 22:31 | 3000856 Lord Drek
Lord Drek's picture

So

When is all this supposed to go down?

Tue, 11/20/2012 - 23:02 | 3000926 ebworthen
ebworthen's picture

Bullish for expatriation and/or offshore accounts.

Tue, 11/20/2012 - 23:22 | 3000979 CuriousPasserby
CuriousPasserby's picture

Maybe people are pulling out of MMAs due to the uncertainty with the rules and going into FDIC accounts. That's what I'm planning for some IRAs. And the only thing I'm spending consumer money on is bullion.

Tue, 11/20/2012 - 23:46 | 3001052 citizen2084
citizen2084's picture

Booking CapGain prior to new tax year...

peAce

Wed, 11/21/2012 - 00:17 | 3001131 QE49er
QE49er's picture

We are at the very end of the debt aquisition cycle, everyone at the top knows it and there is nothing more that they can do to sell their lie to investors.

Wed, 11/21/2012 - 00:43 | 3001179 spekulatn
spekulatn's picture


Why?

We don't know, but the people who control $5.6 trillion in US commercial bank savings deposits - certainly not the vast majority of the US population who have virtually no money saved up, but the true 1% - just decided to park the most cash on a week over week basis into their savings accounts in history.

Perhaps ask them why they did it...

 

Great stuff ZH. 

 


Wed, 11/21/2012 - 01:05 | 3001215 Milton Waddams
Milton Waddams's picture

and now everyone knows why 'classic' inflation will never gather steam (to the contrary, the headwinds of deflation are still the extant threat)... the overwhelming amount of 'excess' capital is increasingly being contained into fewer and fewer 'hands'.  at the next bernanke 'fireside chat' someone should take the opportunity to inquire about the chairman's stance on eugenics.

Wed, 11/21/2012 - 01:33 | 3001250 MikeMcGspot
MikeMcGspot's picture

I just threw another  $50 into savings to keep my checking free. Every little bit helps.

Wed, 11/21/2012 - 04:15 | 3001334 resurger
resurger's picture

+5

Wed, 11/21/2012 - 05:26 | 3001337 Supernova Born
Supernova Born's picture

Red light? I'll raise you a bridge out.

"...a fiscal shock of that size [going over the fiscal cliff] would send the economy toppling back into recession"
-The Bernank 11/20/12

The Bernank telegraphed today that Obama is going to make the Republicans an offer they cannot possible accept.

The Bernank KNOWS recession is coming and the convenience of alleging Republican unwillingness to "compromise" is the cause of the recession is simply totally irresistible.

We're going over the cliff.

Even if the Boner and Cantor agree to show up to Congress in blackface singing Al Jolson songs... [and if they did, Obama would then state that while the R's had submitted to ALL democrat demands, making any agreement with such insane racists is not possible].

We're going over the cliff.

Wed, 11/21/2012 - 05:08 | 3001352 slackrabbit
slackrabbit's picture

Actually this isn't surprising.

Again in Weimar germany everyone saved because they were worried about their job.

However when the economy started to recover, that was when eveyone started to spend and hyper-inflation actually kicked in.

Also it maybe a seasonal factor as well. If people are tapped out, they may save a bit for black friday and xmas.

 

Thu, 11/22/2012 - 10:36 | 3004374 e-recep
e-recep's picture

seasonal factor? don't you see the slope change after the lehman collapse? people and companies are hoarding cash, lots of it. burying gold in the backyard is not an option for everyone.

Wed, 11/21/2012 - 05:31 | 3001364 Roger Knights
Roger Knights's picture

"...  just decided to park the most cash on a week over week basis into their savings accounts in history. Perhaps ask them why they did it..."

Let me count the ways. Greece, Gaza, Iran, Fiscal Cliff, Obama reelection ...

Oops, ran out of fingers.

Wed, 11/21/2012 - 05:44 | 3001373 Supernova Born
Supernova Born's picture

So much paper, so little time.

Wed, 11/21/2012 - 07:15 | 3001416 jmcadg
jmcadg's picture

Stage 1.

Now let's see this balance vanish and watch a line of lorries trundle out of the LBMA.

Thu, 11/22/2012 - 06:26 | 3004149 f16hoser
f16hoser's picture

"Matress Cash" and Gold/Silver bullion. May I recommend to you that you have both on hand and a big gun to protect it. Bernanke is fucked. The cure is the problem.

Sat, 11/24/2012 - 11:21 | 3008349 flow5
flow5's picture

Durden you don't understand money & central banking. Savings can be attracted from the non-banks (shadow banks or financial intermediaries).  It's called dis-intermediation (where the size of the non-banks shrink, but the size of the commercial banking system remains unaffected).

Introducing the payment of interest on excess reserve balances on Oct 9, 2008 thwarted our recovery.  Remunerated excess reserve balances alter the construction of a normal yield curve, they INVERT the short-end segment of the yield curve known as the money market (which funds the capital market, etc.)

The lending capacity of financial intermediaries (non-banks) is almost exclusively dependent on the volume of voluntary savings placed at their disposal. However, the CBs could continue to lend if the public should cease to save altogether. The size of the CBs is determined by monetary policy - not the savings practices of the public.

The non-banks are the CB's customers. From the standpoint of the system, the non-banks do not compete with the CBs for savings. Savings flowing through the non-banks never leave the CB system in the first place.

Unspent savings exert a depressing effect upon the economy. I.e, savings impounded within the CB system have a velocity of zero (because CBs create new money when they lend & invest, CBs do not loan out existing deposits, saved or otherwise. 

And lending by the non-banks is non-inflationary (ceteris paribus), whereas lending by the CBs is inflationary.  I.e., CB lending expands both the volume & rate-of-turnover of money, whereas, lending by the non-banks affects only the turnover of existing money.

The .25% remuneration rate sharply reduced the supply of loan-funds in both the money market & capital market. It has necessitated that the Fed follow a much easier monetary policy in order to counteract the policies’ depressionary impact.

One of the principle reasons the Fed expanded its balance sheet was to offset the decline in the supply of loan-funds (increase the availability & decrease the cost of loan-funds).  However in the process the Fed created a shortage of safe assets (reduced the supply of collateral in the repo market).  And IBDDs aren’t close substitutes as they are only held within the system by the CBs whereas lending by the non-banks required governments.  This un-necessary competition has set up a "collateral squeeze" & reduced the “velocity of pledged collateral.

The upshot is that IOeR's result in a cessation of the circuit income & transactions velocity of funds. And in the longer run, IOeR's exacerbate stagflation.

Sat, 11/24/2012 - 13:38 | 3008512 ThanksIwillHave...
ThanksIwillHaveAnother's picture

Great point about how the FED has destroyed collateral health.   In fact, the collateral market is a better indicator for economic health.  The fact that it is very hard to get a private loan to start a new biz (with solid biz plan and skin) tells us the economy has questionable asset valuation and is on life support.

Sat, 11/24/2012 - 13:32 | 3008505 ThanksIwillHave...
ThanksIwillHaveAnother's picture

Well, the persons who are transferring estate assets would not be active traders so would be more likely to dump stock sale revenue in a savings vehicle (i.e. FDIC insurance applies).   And those who question broker health and think tax rates are going up and up, i.e. fiscal cliff, would move money to more "conservative" vehicles and lock in lower tax rate.

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