Savings Deposits Soar By Most Since Lehman And First Debt Ceiling Crisis

Tyler Durden's picture




 

A month ago, we showed something disturbing: the weekly increase in savings deposits held at Commercial banks soared by a record $132 billion, more than the comparable surge during the Lehman Failure, the First Debt Ceiling Fiasco (not to be confused with the upcoming second one), and the First Greek Insolvency. And while there were certainly macro factors behind the move which usually indicates a spike in risk-aversion (and at least in the old days was accompanied by a plunge in stocks), a large reason for the surge was the unexpected rotation of some $70 billion in savings deposits at Thrift institutions leading to a combined increase in Savings accounts of some $60 billion. Moments ago the Fed released its weekly H.6 update where we find that while the relentless increase in savings accounts at commercial banks has continued, rising by another $70 billion in the past week, this time there was no offsetting drop in Savings deposits at Thrift Institutions, which also increased by $10.0 billion. The end result: an increase of $79.3 billion in total saving deposits at both commercial banks and thrifts, or an amount that is only the third largest weekly jump ever following the $102 billion surge following Lehman and the $92.4 billion rotation into savings following the first US debt ceiling debacle and US downgrade in August 2011.

In total, there has been an increase of $112 billion in deposits in savings accounts in the past month alone, roughly the same as the total non-M1 M2 momey stock in circulation.

Ironically, it was only yesterday that we demonstrated the relentless surge in bank deposits despite the ongoing contraction in total bank loans, and explained how it is possible that using repo and rehypothecation pathways, that banks are abusing the endless influx of deposits into banks and using this money merely as unregulated prop-trading funds, a la JPM's CIO. In other words the "money on the sidelines" now at all time record highs, is anything but, and is in fact about $2 trillion in dry powder to be used by the banks as they see fit.

But most importantly, we showed how even as those happy few who can still afford to save, are fooling themselves int believing that they are pulling money out of other assets and storing it in what they perceive to be electronic mattreses at their friendly neighborhood JPM, Wells or Citi branch, and thinking this money is safe and sound. Alas, nothing could be further from the truth.

Because by depositing money into banks, ordinary Americans (and companies) are merely providing even more dry powder for the banks to trade on a prop, discretionary basis, either as directly investable capital or as asset collateral, and by handing over their hard earned cash to the banks are assuring that the scramble to bid up any and all risk assets continues indefinitely.

Yes, dear saver: the reason why stocks continue to soar above any fundamentally-driven level, is because you just made that bank deposit.

It also means, that come the New Year, and the unlimited insurance of various deposits comes to an end, and when banks once again represent a counterparty danger to savers (where they will be merely a general unsecured claim over and above any FDIC insured limit, be it $250,000 or less), should said deposits be pulled out of banks (and according to the WSJ there is about $1.5 trillion in deposits that may be impacted), the net result of such capital reallocation would be far more disastrous to stock markets than anything the fiscal cliff and/or debt ceiling theater could possibly do as it would mean unwinding an ungodly amount of trades that have had$1.5 trillion as real assets, with subsequent repo and re-repo leverage applied to them.

Source: H.6, St Louis Fed

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Thu, 12/27/2012 - 18:46 | 3100063 Payable on Death
Payable on Death's picture

Inverse bank run?

Thu, 12/27/2012 - 19:06 | 3100105 CPL
CPL's picture

People pulling out of the market asap into cash.  Jokes on them though, cash isn't what it used to be.

Thu, 12/27/2012 - 20:17 | 3100278 Texas Ginslinger
Texas Ginslinger's picture

With all the new money the fed has created, this would be expected, right..??

The cash has to go somewhere..

Thu, 12/27/2012 - 21:13 | 3100395 Thomas
Thomas's picture

The cash on the sidelines meme has always confused and confounded. This particular story is especially vexing. I am not sure what to make of it (just like that morning when that really cute, high energy options gurette announced on CNBC that somebody just bought a shitload of waaay out of the money puts on Bear Stearns.)

Thu, 12/27/2012 - 21:38 | 3100451 economics9698
economics9698's picture

People are scared, they put the money in a “safe” bank, the bank uses the money on stupid stuff trying to make a killing, bankruptcy will ensue, Fed will be there to bail them out again.

Spoiled kids who do not care because they own the printing press.

Best course of action, end the Fed, hang bankers, confiscate all bank holdings and all banker wealth, declare bankruptcy. 

Thu, 12/27/2012 - 19:06 | 3100106 RockyRacoon
RockyRacoon's picture

No problemo.   They'll just extend the unlimited account insurance.  Can't let a melt down happen when the fix is so easy.

Thu, 12/27/2012 - 23:18 | 3100682 mkkby
mkkby's picture

Exactly, my furry friend.  They will kick that can and the other "cliff" as well.  I guarantee they will just extend the budget and debt limit until after the next election.  All this theater is just kabuki.  Yawn.

Thu, 12/27/2012 - 19:08 | 3100112 cougar_w
cougar_w's picture

Yes that's it, punish the banking scum by forcing them to hold too much money. Fill their vaults unti they cry like little girls.That will learn them.

Thu, 12/27/2012 - 19:11 | 3100119 ball-and-chain
ball-and-chain's picture

Isn't this good news?

Don't we want people to save?

Most people wouldn't touch the market with a ten foot pole.

Saving good.  Speculation bad.

http://www.angrysinner.blogspot.kr/2012/12/yesterday-dragon-lady-served-spare-ribs.html

Thu, 12/27/2012 - 19:24 | 3100144 Tyler Durden
Tyler Durden's picture

Here is what was said above (and yesterday) simplified:

- the money you refuse to invest in the market and put in a bank savings account for "safe keeping"? It is used by the same bank to buy stocks and/or for other risky pursuits.

Thank Glass-Steagall and FAS 140.

Thu, 12/27/2012 - 19:31 | 3100167 ekm
ekm's picture

It's a closed loop system. The money has nowhere to go with the exception of................... inside a literal matress.

 

Whereever money sits, Primary Dealers can still use it until:

- All market is bought up (basically now that NYSE bankrupted)

- People literally withdraw millions of dollars in real cash, which would lead to................. military law.

Thu, 12/27/2012 - 21:30 | 3100401 Thomas
Thomas's picture

Indeed, the money on the sidelines needs to be created. Ya can't just slosh it around and get changes. Thus, I believe they are creating it now. Who would ever be the source of new money? Got to ponder that one...

Thu, 12/27/2012 - 21:31 | 3100436 Thomas
Thomas's picture

OK.I've pondered it and decided that this planeted CNBC story about big money exiting the accounts is the clue: http://www.cnbc.com/id/100342017 I am guessing the Fed is fluffing the accounts in anticipation, but I really haven't a clue.

Thu, 12/27/2012 - 22:12 | 3100531 ekm
ekm's picture

It took me a long time to figure this out, a lot of reading. Besides ZH it was Paul Craig Roberts who explained it the clearest.

Based on his explanation of Primary Dealers literally betting with INTEREST RATE SWAPS, I made my own metaphor:

 

Imagine you are in a bar and place a bet with another person at $100 for Team A against Team B in NFL one Sunday. So both you and the other guy place $5 with the bartender as initial deposit.

Game is over, you win, the other guy has to come up with $95. There's a problem; he's got nothing. He bet $100 by having only $5.

 

The other guy literally CREATED $95 without having a cent in a pocket more than the initial $5.

That's what the primary dealers do. They bet 1 billion in swaps but they have only 1 million. When they lose, the Fed has TO CREATE  BILLION MINUS 1 MILLION by buying bonds. In the media they call this: BAIL OUT

That's how the excess liqudity is created.

 

Thu, 12/27/2012 - 22:59 | 3100656 Thomas
Thomas's picture

Interesting analogy. You could even leave the $5 part out. 

Fri, 12/28/2012 - 02:36 | 3101028 economics9698
economics9698's picture

"Thank Glass-Steagall and FAS 140."  None of that shit wouild matter if they let the TBTF fail.  The best regulation is failure.

Fri, 12/28/2012 - 18:22 | 3103255 smiler03
smiler03's picture

Tyler says:

 

"Here is what was said above (and yesterday) simplified:

- the money you refuse to invest in the market and put in a bank savings account for "safe keeping"? It is used by the same bank to buy stocks and/or for other risky pursuits."

 

So by extension Tyler, if everybody withdrew all their cash and bought stocks, the markets would plunge? I cannot understand this logic at all, in fact, it sounds completely ass backwards.

Fri, 12/28/2012 - 10:41 | 3101437 TruthHunter
TruthHunter's picture

Doesn't it go on from there? Instead of dragging the guy out back and dumping him in

a trash can, you slide down the bar and make a new bet with the "$100" bucks you just "won".

Thu, 12/27/2012 - 19:36 | 3100175 aleph0
aleph0's picture

"A month ago, we showed something disturbing: the weekly increase in savings deposits held at Commercial banks "

.... I also find this "disturbing" ... for the "savers" !

 

Thu, 12/27/2012 - 19:52 | 3100215 Joe moneybags
Joe moneybags's picture

I'm a believer in diversification for safety.  I bury my gold in two coffee cans in the backyard.

Thu, 12/27/2012 - 19:55 | 3100224 ekm
ekm's picture

Very smart. My grandfather kept it underground for 45 years hiding it from the communists.

It doesn't corrode if it's real gold.

Thu, 12/27/2012 - 20:17 | 3100280 nmewn
nmewn's picture

Your grandfather was a very wise man ekm.

It goes along with what was passed down through my Southern family to me..."_____don't ever let them (government) fool you_____, it's all about your money."

It's never been more clear than now and it is being passed down to mine.

Whether its form takes on a communist facade, a fascist, socialist, capitalist, republican or (God forbid) a "democracy", they will always attempt to convince you that they know better than you, how to best disperse YOUR saved labor.

Despite their track record of bankruptcy and misery.

Thu, 12/27/2012 - 20:40 | 3100325 Renewable Life
Renewable Life's picture

Most Beautifully Put!

Thu, 12/27/2012 - 21:00 | 3100371 AGuy
AGuy's picture

"My grandfather kept it underground for 45 years hiding it from the communists."

That's an awful long time to hide wealth. Should I and other PMs owners need to keep it underground for that long, its likely to stay there for eternity, since most of us willl be dead in 45 years.

 

 

Thu, 12/27/2012 - 21:30 | 3100428 nmewn
nmewn's picture

Not if you tell your kids where to find it.

Ah yes, the eternal price of a death smile ;-)

Fri, 12/28/2012 - 01:23 | 3100952 ThirdWorldDude
ThirdWorldDude's picture

There's a fable by Aesop describing how it's done... I believe it was called "Teaching youngsters to be vigilant".

Thu, 12/27/2012 - 21:19 | 3100409 Thomas
Thomas's picture

Back in 2006 I diversidied not by asset class--that's mostly gold et al.--but by institution. I used to concentrate it for easy monitoring. Now it is spread around the globe to avoid a single, catastrophic MFG moment. Alas, we could still have that moment and diversification increases the probability that I will have such a moment. Thus, 20% physical metal is the only real hedge. If that hedge comes to play, however, I will be a very rich person relatively speaking. 

Fri, 12/28/2012 - 01:35 | 3100970 seek
seek's picture

80% is the only real hedge, not 20%.

That moment will come, soon. Sadly (and I say this as a goldbug) the wealth preserved will mean little for years after said moment, though I do hope it results in our being free and poor rather that just poor.

Thu, 12/27/2012 - 21:13 | 3100396 Water Is Wet
Water Is Wet's picture

Good article Tyler.  +alot

Thu, 12/27/2012 - 23:28 | 3100707 mkkby
mkkby's picture

That's fine, Tyler.  Let them use our savings to pump the market.  We still get a good deal -- return OF capital -- at least until the currency dies.  They'd do it anyway with POMO and any other shenanigan they can think of.

Until my mattress is FDIC insured, I'll take the savings account and lake shiny bottom.

PS - Let me say "thanks again" for all the idiot investors in paper gold who make it cheap and easy to buy physical.

Fri, 12/28/2012 - 01:11 | 3100939 Jacks Nipple
Jacks Nipple's picture

Next month can you do a graph that shows all this cashing coming out of the banks to pay the credit card bills for the historical high-point of Android activation?

 

Fri, 12/28/2012 - 05:25 | 3101107 Snidley Whipsnae
Snidley Whipsnae's picture

One reason for the increase in deposits is increased home taxes, home insurance, auto and health insurance, larger utility bills, food, fuel, etc.

All of my costs for the above items, and more, have increased by ~ 1/3rd.

Those people that do not want to pay credit card interest pay for their bills wiht a transfer from savings/checking accounts to the bill collectors. 

For instance: When my home taxes are due I (and many others) have stashed away the dollars to pay this expense. Same for the other (more or less fixed) expenses.

I don't know how much total expenses have increased over the past few years for the entire population of the US, but mine have increased about 33% across the board. If people do not have the cash to pay their expenses they lose their home to taxes or lose their health insurance, auto insurance, etc.

This is only anecdotal info but might explain part of the increase in bank savings.

Thu, 12/27/2012 - 19:33 | 3100171 HD
HD's picture

Ask Japan how "good" saving is when your country prints to oblivion...

Thu, 12/27/2012 - 21:19 | 3100412 Thomas
Thomas's picture

Forget Japan. Ask Kyle.

Thu, 12/27/2012 - 19:30 | 3100162 Snakeeyes
Snakeeyes's picture

Bank deposits have exploded since the financial crisis. While some of it is due to the raising of the deposit limit increase, people are scared about taxes, Obamacare and the future.

http://confoundedinterest.wordpress.com/2012/12/23/loss-of-confidence-cu...

Thu, 12/27/2012 - 18:49 | 3100066 Rainman
Rainman's picture

Like askin Lamar in south Compton to please watch your cash..idiots.

Thu, 12/27/2012 - 19:12 | 3100117 cougar_w
cougar_w's picture

Except that if Lamar took your money, you could have someone put a cap in him for $20 and a cold forty. Just say'n.

Thu, 12/27/2012 - 21:20 | 3100414 Thomas
Thomas's picture

And that is indeed the consequence of the rule of law downgraded to a guideline.

Thu, 12/27/2012 - 21:25 | 3100420 Thomas
Thomas's picture

And that is indeed the consequence of the rule of law downgraded to a guideline.

Thu, 12/27/2012 - 22:03 | 3100512 Thomas
Thomas's picture

But I repeat myself.

Thu, 12/27/2012 - 18:51 | 3100068 Wakanda
Wakanda's picture

Smells like Black Swan if those deposits get pulled.

Thu, 12/27/2012 - 18:56 | 3100083 otto skorzeny
otto skorzeny's picture

are you expecting the much anticipated "rush back into equities" Cramer?

Thu, 12/27/2012 - 19:00 | 3100091 Wakanda
Wakanda's picture

Who is Cramer?

Thu, 12/27/2012 - 19:02 | 3100094 otto skorzeny
otto skorzeny's picture

only the smartest man in the history of the world EVER-Jim Cramer on CNBC.

Thu, 12/27/2012 - 19:06 | 3100107 Wakanda
Wakanda's picture

CNBC? 

Are you from planet O?

Thu, 12/27/2012 - 19:08 | 3100111 RockyRacoon
RockyRacoon's picture

Wakanda deserves kudos for not knowing who the fool Cramer is.

Let's give credit where it's due.   Don't we both wish we could ask the same question?

Thu, 12/27/2012 - 19:09 | 3100114 Wakanda
Wakanda's picture

Ignorance can be bliss, but not always.

Fri, 12/28/2012 - 03:14 | 3101049 bankerbackbacon
bankerbackbacon's picture

Cramer's a twat, I cringe at his yelling about the market getting killed during the crash. I wish

Fri, 12/28/2012 - 03:14 | 3101050 bankerbackbacon
bankerbackbacon's picture

Cramer's a twat, I cringe at his yelling about the market getting killed during the crash. I wish

Thu, 12/27/2012 - 19:09 | 3100116 ugmug
ugmug's picture

Jim Cramer reminds me of a person who is talking loudly in a restroom stall as if he is talking to someone on a cellphone. Then you look through the crack in the door and you find out that he is really talking to himself.

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