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Savings Deposits Soar By Most Since Lehman And First Debt Ceiling Crisis
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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Inverse bank run?
People pulling out of the market asap into cash. Jokes on them though, cash isn't what it used to be.
With all the new money the fed has created, this would be expected, right..??
The cash has to go somewhere..
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.)
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.
No problemo. They'll just extend the unlimited account insurance. Can't let a melt down happen when the fix is so easy.
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.
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.
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
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.
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.
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...
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.
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.
Interesting analogy. You could even leave the $5 part out.
"Thank Glass-Steagall and FAS 140." None of that shit wouild matter if they let the TBTF fail. The best regulation is failure.
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.
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".
"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" !
I'm a believer in diversification for safety. I bury my gold in two coffee cans in the backyard.
Very smart. My grandfather kept it underground for 45 years hiding it from the communists.
It doesn't corrode if it's real gold.
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.
Most Beautifully Put!
"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.
Not if you tell your kids where to find it.
Ah yes, the eternal price of a death smile ;-)
There's a fable by Aesop describing how it's done... I believe it was called "Teaching youngsters to be vigilant".
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.
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.
Good article Tyler. +alot
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.
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?
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.
Ask Japan how "good" saving is when your country prints to oblivion...
Forget Japan. Ask Kyle.
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...
Like askin Lamar in south Compton to please watch your cash..idiots.
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.
And that is indeed the consequence of the rule of law downgraded to a guideline.
And that is indeed the consequence of the rule of law downgraded to a guideline.
But I repeat myself.
Smells like Black Swan if those deposits get pulled.
are you expecting the much anticipated "rush back into equities" Cramer?
Who is Cramer?
only the smartest man in the history of the world EVER-Jim Cramer on CNBC.
CNBC?
Are you from planet O?
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?
Ignorance can be bliss, but not always.
Cramer's a twat, I cringe at his yelling about the market getting killed during the crash. I wish
Cramer's a twat, I cringe at his yelling about the market getting killed during the crash. I wish
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.
Patrick Byrne of Overstock.com knows Jim Cramer well.
You peek through bathroom stalls to find out if someone's talking to himself? Sounds like you're hoping he needs company.
Or, as I refer to him, the FED employee at CNBS.
That's LIESman.
Cramer's bread is buttered by Goldman.
It is he: http://tinyurl.com/bugndqc
We black swans don't smell any worse than the white ones.
Sheeple, sheeple...have you never heard of a bank holiday?
And what will you do, think or say when they lock the vaults and ring your little bank with men carrying guns? Will you say, "At least my moneys safe from thieves!"...lol.
VAPORIZED, bitchez.
A fave term that needs a resurgence, imo. Especially if you're unfortunate enough to have skin in this game (edit: or trust a bank with your fiat instead of stacking).
No doubt about it...keep on stackin.
Free Corzine! ;-)
Speaking of bank holidays, this Biden speech caught my eye a while back.
I never knew we were that close.
http://www.youtube.com/watch?v=d-cLZai63GA
You're reading my mind...Corzine & Biden on the same stage.
One, an incompetent buffoon, the other, an evil, money grubbing SOB...both, former senators.
(Sigh)
Incompetent, but very rich. I remember that corrupt Govenor Koerner. His dumb widow wanted to know where all the shoeboxes stuffed with money she found in his closet came from!
Optimator, you are mistaken, the attribute belongs to Paul "Shoebox" Powell, our former Illinois Secretary of State
does "under the mattress" count? he who panics first panics best-bitchez
The Banksters can steal that too, inflation, the cruelest tax of all. A hard mattrass is healthy, so put some gold in there instead.
please elaborate further on what you mean by this "It also means, that come the New Year, and the unlimited insurance of various deposits comes to an end,"
There was insurance put on loans during the crisis in 08 for deposits over the normal 250K. That is due to expire 1/1/13 and it will revert back to the normal FDIC 250K max amount. I would guess they will extend it as big depositers will get nervous about having large sums on deposit without gov. backstop I'm sure banks will also be pushing for it so depositers won't "spread the wealth. Hope that helps
Sorry, anyone around more than 20 years knows pre-crisis FDIC insurance was the first $100,000. Now there is no practical limit.
The insurance limits have been extended until 2014.
Link:
http://www.boston.com/business/personalfinance/managingyourmoney/archive...
This refers to the increased FDIC limit that will expire at the end of the year.
The FDIC has had what they call a "transaction account guarantee" (TAG) program that essentially insures 100% of deposits of unlimited amounts in your bank of choice. The account can pay no interest, its been a huge mattress stuff. That program ends next Monday. Its estimated that businesses, individuals, municipalities, etc. currently have $1.5 trillion salted away in these bank accounts and they will have their protection cut back to $250k at the first of the year. Come Tuesday, Jan 1, 2013 its expected that money managers will be shifting vast sums out of these bank accounts into other instruments in order to regain the security they have lost as a result of the FDIC cancelling the TAG program.
Cyber attack on the banks......
How much did you have in your account?
We have no record of that, since the attack.
SOL, pal.
It's a cluster fuck out there.
Just imagine if 1% of that "money" in deposits were to be converted to gold, silver, or lead.... woah get up on this poney!
So there are now record money in cash savings in the bank... yet stocks are at near record highs? Funny printy money.
Just goes to show that this stock market near high is all rigged with funny money and only the banks benefitting - clearly they rae desperate to lure in sucker job public before crashing the market.
Worse than that, it's paper money that even hasn't been printed yet! Once the banksters put it in circulation............
Cash, especially electronic, is still viewed by the majority as the most liquid means of exchange. Because inflation has been so persistent, and no fiat coin is readily available of a high denomination, coins in the public consciousness do not represent wealth, but instead poverty...
a million dollar "fiat" coin is still fiat.
Those in Weimar Germany that had gold marks did O.K. though -- better than O.K.
Do these figures include loan pay-downs? That would be a good thing. That is what I am doing fast and furiously. On the other end of this, may none believe the banker fractional reserve, debt-based wealth lie... Starve the beast. Let them sell stocks to themselves until they all die.
Coyote's still in mid-air it seems.
nickels bitchez
nmewn You made me laugh,thanks
Shhh... the out of hours fairies are at work lifting the futures....with phantaseconds and glitterglims
0.02% on "High Yield Savings"...it's no wonder everyone wants in!
lol
BTFD
WHO would want to save in cash? And cash at these peanut rates?
Try gold. Or mining stocks. Or emerging market stocks. Or Chinese stocks. Or Japanese stocks.
These people are too risk-averse for the real world. They need to be taught a lesson: that it is IMPOSSIBLE to avoid risk. It's always there, somewhere, hidden...
Yeah, those poor (well, not poor) stupid (well not stupid either) people should buy gold bitchez it is risk free. [/sarc.]
that banks are abusing the endless influx of deposits into banks and using this money merely as unregulated prop-trading funds,
**********
The sad part is-is that it's probably legal-once a deposit is made it ceases being cash and becomes a credit transaction on the part of the depositor-
Wait, I thought the whole point of anticipating a downturn/recession/collaspe was to take your money OUT........not put it IN?
If you can't spot the sucker at the poker table..........
Hoarders! Savings must be taxed!
OK Tylers, we get it already.....
Yes, the banksters are crooks. The Federal Reserve are crooks. Their enablers in the government media complex are crooks. And the whole sordid mess is about to collapse on itself. Or at least it will someday. Maybe. Eventually.
That's all very interesting trivia. So how 'bout some practical information on dealing with all of the above? It really would be nice to move to a beautiful tax haven and listen to the relaxing sound of our PMs clinking together, but it isn't reality for the vast bulk of the ZH readership.
If you're not comfortable with making controversial suggestions, then maybe you could try your hands at fiction? You could tell us some bedtime stories! "Goldilocks and the Three Offshore Privacy Havens" is sure to be a hit.
The solution is to let the system collapse.
Nothing bad is gonna happen.
In Iceland, nothing all that bad happened. In Weimar Germany...it didn't end so well.
Germany was under war reparation obligations. France invaded the Ruhr mineral area as payment.
Actually Strassburg is still in France. European parliament is there.
Strasbourg/Lorraine Musical Chair Winners
843-1766 = kraut
1766-1871 = frog
1871-1918 = kraut
1919-1939 = frog
1939-1945 = kraut
1945-present = frog
I bet my uncle would love to tell me about how important it is to help Europe settle things. Oh yeah, he got burned alive in a tank "helping" in 1944.
(thought better of it and deleted it)
Velocity of money is plummeting. That's my take away from the rush to savings.
I have been thinking about this all night long.....I can´t figure out why people or entities would be opening a savings account...its a money loser...unless its dirty money...money laundering????...its not mom and pop opening A Christmas savings account....new Bankia customers....it does not seem that people are selling stocks and taking the cash....the market is still up????....really confused on this one????
Cash is just like gold in one respect. It ain't yours if you don't hold it.