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A Record $220 Billion "Deposit" Injection To Kick Start To The 2013 Market

Tyler Durden's picture


When people talk about "cash in the bank", or "money on the sidelines", the conventional wisdom reverts to an image of inert capital, used by banks to fund loans (as has been the case under fractional reserve banking since time immemorial) sitting in a bank vault or numbered account either physically or electronically, and collecting interest, well, collecting interest in the Old Normal (not the New ZIRPy one, where instead of discussing why it is not collecting interest the progressive intelligentsia would rather debate such trolling idiocies as trillion dollar coins, quadrillion euro Swiss cheeses, and quintillion yen tuna). There is one problem, however, with this conventional wisdom: it is dead wrong.

As we explained in "Dear Steve Liesman: Here Is How The US Financial System Really Works", in a day and age when i) the Fed has to step in and fill the void of deposit creation left by traditional bank lending, which has been dead for the past 4 years, via reserves, and ii) commercial banks like JP Morgan can step in and use this deposit excess (i.e., direct fungibility of excess reserves) for investment purposes, a surge in deposits means one simple thing: the banks have more dry powder to invest as they see fit.

Don't believe us? Believe the Federal Reserve of the United States instead:

[B]anks are required to maintain reserves equal to only a fraction of their deposits. Reserves in excess of this amount may be used to increase earning assets - loans and investments.


Deposit expansion can proceed from investments as well as loans. Suppose that the demand for loans at some Stage 1 banks is slack. These banks would then probably purchase securities. If the sellers of the securities were customers, the banks would make payment by crediting the customers' transaction accounts; deposit liabilities would rise just as if loans had been made. More likely, these banks would purchase the securities through dealers, paying for them with checks on themselves or on their reserve accounts.

Source: "Modern Money Mechanics", Chicago Fed, 1961

We realize that this is diametrically opposite to what the general public has been indoctrinated by the Fed and its explanation of how excess reserves are used by banks, not to mention by an insolvent federal deposit insurance corporation, because imagine the panic that would ensue if people were to realize that the money they dutifully earn and save, and then deposit in a bank in a checking or savings account where it is assumed to be safe, is actually used as funding for ultra risky trades by firms like JPM's London-based Chief Investment Office (as JPM itself showed precisely happened), for example allowing a bank like JP Morgan to buy the stock or bonds of a bank like Goldman Sachs?

And after all, when one strips away all the different schools of meaningless philosophic thought, and the quasi-religious monetary dogma, in this modern age all money (and reserves), whether low-powered, high-powered, M1, M2, is really just electronic 1s and 0s in some mainframe, resulting from credit creation, either by commercial banks, or by the Fed, either under traditional or shadow bank conduits, which can be repoed, re-repoed, hypothecated, re-hypothecated at a whim, and a moment's notice.

Yes folks: this is money, it is not a philosophy textbook, and money will do whatever it is told, not what some archaic monetary school of thought allows it to do.

So when one puts all of this together, what does it mean from a fund flow perspective?

Simple: the Fed purchases assets on an unsterilized bases, as it started doing with QE3 but especially following the expiration of Twist when it is now adding $85 billion to its balance sheet on a monthly basis, the result is excess reserves, which appear on bank books as excess deposits over loans. Then commercial banks take a hint from the JPM CIO (which in turn was simply caught doing what banks have always down with excess reserves throughout history, and especially since 2008) and use the funds to buy risk assets.

Period. End of story.

Certainly the story that claims "money is on the sidelines" when talking about bank deposits: absolutely incorrect - money sitting in deposits is used by the banks to ramp the market, courtesy of the unwind of Glass-Steagall.

Which is why tracking deposit flow data is so critical, as it provides hints of major inflection points, such as when there is a massive build up of deposits via reserves (either real, from saving clients, or synthetic, via the reserve pathway) which can then be used as investments in the market.

And of all major inflection points, perhaps none is more critical than the just released data from today's H.6 statement, which showed that in the trailing 4 week period ended December 31, a record $220 billion was put into savings accounts (obviously a blatant misnomer in a time when there is no interest available on any savings). This is the biggest 4-week total amount injected into US savings accounts ever, greater than in the aftermath of Lehman, greater than during the first debt ceiling crisis, greater than any other time in US history.

So the next time someone asks you how it was possible with retail investors fleeing the market in droves (see relentless, 24 week straight outflows from domestic equity mutual funds) and putting their money in other assets, or money markets, or, alas, in the "safety" of bank accounts, that the market experienced its biggest move higher ever to start the new 2013 year, now you know.

Oh and thank Bernanke for creating $85 billion in 'deposits' each month which will be used by banks to, what else, buy stocks.


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Thu, 01/10/2013 - 20:00 | 3142731 VonManstein
VonManstein's picture

85 billion isnt enough for the 30YR. Bens gonna have to get his act together in late january. The big ones coming

Thu, 01/10/2013 - 20:04 | 3142742 CPL
CPL's picture

Wait for it...

Thu, 01/10/2013 - 20:39 | 3142865 caShOnlY
caShOnlY's picture

Wait for it...


(sorry it took so long)

Thu, 01/10/2013 - 20:42 | 3142874 Thomas
Thomas's picture

That does indeed help explain for me the dichotomy of investor withdrawals and ramping markets. I think the FOMC folks should be in leg irons.

Thu, 01/10/2013 - 20:53 | 3142908 caShOnlY
caShOnlY's picture

Is there anymore clear of a reason why anyone, in their right mind, after reading this and now realizing the manipulation is not only confirmed but the channel exposed, would invest in anything other than survival supplies, guns, ammo, gold and silver?   I can't help but think that this absolutely has to stop but won't until the whole damn blows. 

GLOBAL FINANCIAL and ECONOMIC collapse.  It's gauranteed!! 

Fri, 01/11/2013 - 01:59 | 3143445 TruthInSunshine
TruthInSunshine's picture

The Federal Reserve has now gone "all in" on a bet that their "put" can keep equity markets propped up long enough to allow for a real recovery with real economic growth of sufficient quality and quantity that allows them to step off the accelerator that they're using to gun the equity bubble.

So, what happens when that real recovery fails to transpire...and fails to transpire...and fails to transpire? (There can & will be no recovery since the Fed is not only pushing on a string, but has created a negative feedback loop whereby their "stimulative" monetary policy is creating aggregate demand destruction-- they can now only report positive GDP as stated due to inflation, not consumption/aggregate demand-- i.e. all current reported GDP expansion is purely nominal).

Worse yet, what happens when that recovery not only fails to transpire, but the real economy actually begins to contract again (as it already has begun to do), despite the trillions in fiat the Fed has directly or indirectly pumped into equity markets?

We are witnessing the biggest, most leveraged bet in the history of the world: The Bernanke "Virtuous Circle" bet.

(When has any fractional reserve central bank been able to forever keep a bubble inflated? They all have a historical, lifetime batting average of ZERO in this regard.)

When I see Charles Biderman appearing flummoxed in one of his presentations essentially stating that the Fed is literally propping up the equity markets, since retail investors have done nothing but flee continuously from "stocks" since 2008, I can't help but to understand his exasperation-- not exasperation that he somehow doesn't understand what'su truly happening in terms of the forces responsible for the equity market ramp job of the last 3 years, but exasperation that so few people understand the plain and unambiguous reason for this manipulated move.

What we have here is yet another intentionally blown and massive bubble, that's the direct result of Federal Reserve lunacy. The legacy of the Federal Reserve is one of inflating asset bubbles, one after the other, in the wake of the last bubbles popping, in an attempt to prolong our fractional reserve fiat economic structure that is built on pillars of sand.

The kicker is that Bernanke & Company have managed to produce one of the largest equity AND bond bubbles the world has ever seen, SIMULTANEOUSLY.

So, this isn't the bubble of the late 90s...and this isn't the housing/real estate bubble of the 2000s.

This is a MONSTER bubble that makes the and housing ones look positively diminutive by comparison, spread across so many asset classes that it dwarfs any other bubble since...well, take your best guesses, because I can't recall a bubble this large in nominal or real terms.

When this monster of all bubbles blows, game over (I'd sure love to hear some rebuttals as to how the vaporization of the nominal and absolute amount of paper wealth that will occur if I'm correct about this being a bubble ecosystem can be handled in an orderly way, that doesn't literally implode what is left of the real, actual economy, given the level of leverage now being utilized by central banks the world over).

Fri, 01/11/2013 - 10:27 | 3143990 SamAdams
SamAdams's picture

Agreed!  Oh, and I just checked my savings accont.  None of this $220B has showed up yet.  Maybe there is a problem? 

Thu, 01/10/2013 - 21:44 | 3143074 Papasmurf
Papasmurf's picture

That does indeed help explain for me the dichotomy of investor withdrawals and ramping markets. I think the FOMC folks should be in leg irons.

Retail investors are conservative about the use of leverage.  Central bankers, not so much.  A dollar saved is ten dollars bet.

Thu, 01/10/2013 - 22:06 | 3143142 spastic_colon
spastic_colon's picture

which will help explain the reserve releases next week during the major bank earnings reports that will push ES to 1500

Thu, 01/10/2013 - 21:32 | 3143027 BullionBoy
BullionBoy's picture

buy some silver, bitchez

time is drawing short

and yes you can change your IRA into physical silver and put it under lock and key at delaware depository.



Thu, 01/10/2013 - 22:17 | 3143175 bobthehorse
bobthehorse's picture

No explosion is coming.

We're in a deflationary death spiral.

Want to know the future?

Look at Japan.

Thu, 01/10/2013 - 20:03 | 3142737 Mr Pink
Mr Pink's picture

Who the hell would put money in a savings account?

Thu, 01/10/2013 - 20:04 | 3142747 Seasmoke
Seasmoke's picture

i do......Pillows and Mattress Savings and Loan

Thu, 01/10/2013 - 20:08 | 3142767 Lost Wages
Lost Wages's picture

I got so much interest from my credit union this year they had to issue a 1099. ($8.73)

Fri, 01/11/2013 - 05:53 | 3143637 ClassicalLib17
ClassicalLib17's picture

I was going to ask you what credit union you banked with until I realized your windfall was due to the fact that you had a larger account than me.  Interesting how this financial world works

Thu, 01/10/2013 - 20:21 | 3142814 Bulleri
Bulleri's picture

I prefer the bank of Sealy Posturepedic...

Thu, 01/10/2013 - 20:25 | 3142824 nmewn
nmewn's picture

I prefer Sandy Bottom Savings & Loan ;-)

Sat, 01/12/2013 - 22:54 | 3148061 MeelionDollerBogus
MeelionDollerBogus's picture

Boating Accidentz, bitches!

When the most likely party to find your gold is Patrick Starfish you'll probably be just fine.

Thu, 01/10/2013 - 20:42 | 3142878 centerline
centerline's picture

To compliment the Tyler(s) message, this time of year is normally when savings gets drawn down.

Thu, 01/10/2013 - 20:47 | 3142894 nmewn
nmewn's picture


Early IRA-401k withdrawls?

Thu, 01/10/2013 - 21:02 | 3142946 centerline
centerline's picture

Plus holidays, tax payments, insurance, HOA payments, vacations which tend to rotate summer/winter, etc.  Lot's of things cycle at year end and cause draw down!

401K drawdown stuff I speculate is increasing now.  Even at my office I know a few people who have "awakened" and yanked thier money.

Thu, 01/10/2013 - 21:41 | 3143063 nmewn
nmewn's picture

I know I finally did, just counted out 25% for "Vito" to be paid before the 15th.

Thu, 01/10/2013 - 23:53 | 3143372 villainvomit
villainvomit's picture

 Dammit, I have been saying I was going to do this but how do you avoid the 10% penalty ?  No Dis, no first time home buyer, no systematic year over year withdrawal, no medical expense, no college ex......F the IRS,,,,,,,,what do you guys do, just eat the 10%????  I realize you still have to pay tax, but damn!

Fri, 01/11/2013 - 00:46 | 3143442 August
August's picture

That 10% is a tough nut, indeed.  I'm 62, and just completed the total distribution of my retirement plans, writing the tax payment check to the "US Treasury" a few hours ago.  35% hurts, and 45%... I'd rather not contemplate.

Personally, I found it helpful to enter into my financial/tax software, incrementally over many months, the amount of tax that would ultimately be owed.  When I wrote the painfully-large checks today, I simultaneously zeroed out the liability, and my displayed net worth remained unchanged.  Well, it worked for me.....

FWIW the "money" has (legally) departed these shores.

Fri, 01/11/2013 - 01:57 | 3143488 ebworthen
ebworthen's picture

I put money in my savings account.

Sold my house, and banked my 14 years of responsibility (equity) that is completely unappreciated by TPTB, and plan to buy a little Gold, Silver, and ZERO equities.

I'm going to wait out this shit storm, I'm not putting money into the casino (I don't care that I'm not earning interest - FUCK YOU FED and Wall Street!), and if I go broke waiting for the rule of law and sensible government to return to Wall Street and Washington I'll milk the shit out of every government/corporate cow I can lay my hands on.

And if that doesn't work out I will DIE under a freeway overpass before I support this fucking ponzi bullshit system that has been foisted upon the average good citizen.




Thu, 01/10/2013 - 20:14 | 3142752 Rainman
Rainman's picture

What could possibly go wrong for equities with this amount of free play ? ...and the cards are marked. Bullish !

Thu, 01/10/2013 - 20:41 | 3142872 donsluck
donsluck's picture

Right again, Rainman. But beware of your timing in the casino, 'cause if the debt ceiling isn't raised, lookout below!

Thu, 01/10/2013 - 23:47 | 3143356 AccreditedEYE
AccreditedEYE's picture   Not directed at you my good man, just a public service announcement.

Thu, 01/10/2013 - 20:05 | 3142753 Silver Garbage Man
Silver Garbage Man's picture


Thu, 01/10/2013 - 20:08 | 3142770 Lost Wages
Lost Wages's picture


Thu, 01/10/2013 - 20:16 | 3142790 Unprepared
Unprepared's picture

I have (had*) the first two, but I'm not sure how I can get me the last 2.



Thu, 01/10/2013 - 20:07 | 3142757 Catflappo
Catflappo's picture

"retail investors flee the market"... but end up implicitly invested back in it in any case...

Thu, 01/10/2013 - 20:11 | 3142776 savagegoose
savagegoose's picture

watch for shorts on the FDIC

Thu, 01/10/2013 - 20:14 | 3142783 khakuda
khakuda's picture

Thank you. This is all that needs be written on why the market is going straight up. We got a bubble in the late 90s with this crap and we are purposefully doing it again. Bernanke will be the King of creating a massive wealth divide between the speculators and everyone else.

Corrupt beyond words. It should scare someone that stocks CONTINUALLY outpace earnings. That NEVER ends well.

Thu, 01/10/2013 - 21:35 | 3143031 NoDebt
NoDebt's picture

Agreed.  This time will NOT be different.  I used to say that when there is excess liquidity sloshing around that some of those funds "sneak through the cracks" and find risky places to play, even though they are supposed to just sit there until somebody wants to take a loan out.  I was naive.  "Sneaking through the cracks" implies that only a litle bit of that money finds it's way outdoors.  I now know that those cracks are more like big mortar-blast size holes and that money POURS out and goes straight to the casino where it gets an 8-ball of coke, 3 underage hookers and a rack of chips so heavy it requires a cart. 

Just that this time it could possibly happen WHILE the Fed has their foot to the monetary accelerator.  Last time they had barely 2 years of rate increases before the house of cards collapsed (again) and they slammed the pedal back down (again).  What happens if some semi-major financial entity falls over TOMORROW and starts the dominos dropping WHILE we are already at 0% and still main-lining $88B/mo. in QE stimulus?  Or just a garden-variety recession comes along?  What policy bullets are they going to shoot at it?


Thu, 01/10/2013 - 21:56 | 3143108 fonzannoon
fonzannoon's picture

How in the hell can a major financial entity fail when they can just call the red phone on Sunday night and have 17 digits in their account by morning?

It seems like this may go on for a long time. Or a very short time if they try the coin thing.


Thu, 01/10/2013 - 20:17 | 3142794 kchrisc
kchrisc's picture

God, Gold, Guns and Grub

Thu, 01/10/2013 - 20:39 | 3142864 SgtSchultz
SgtSchultz's picture

...and Guts

Thu, 01/10/2013 - 20:57 | 3142923 Pareto
Pareto's picture

.....and Ground

Thu, 01/10/2013 - 20:40 | 3142867 El Oregonian
El Oregonian's picture

And GIRLS!!!

Thu, 01/10/2013 - 20:43 | 3142883 Thomas
Thomas's picture

And guillotines.

Thu, 01/10/2013 - 23:15 | 3143307 TheLooza
TheLooza's picture

and glenfarclas.



Fri, 01/11/2013 - 07:31 | 3143678 John Law Lives
John Law Lives's picture

and Glenfiddich.

Sat, 01/12/2013 - 22:38 | 3148028 MeelionDollerBogus
MeelionDollerBogus's picture

no 'god' / 'gods' thanks - I find my guns 'n' gold last longer without any such fiction

Thu, 01/10/2013 - 20:20 | 3142807 max2205
max2205's picture

Soon to be seasonally adjusted

Thu, 01/10/2013 - 20:23 | 3142817 PUD
PUD's picture

The only incorrect statement here is the flight of individual investors from mutual funds....yes they have fled funds but they have plowed into etf like mother fuckers. And I do not mean just bond funds...spy has had more inflows than any other time in history. I saw the stats on this the other day but I'm sorry I did not save the link. The fact is they (individuals) have only shifted their vehicles not their lust for equity.

Thu, 01/10/2013 - 20:26 | 3142828 Tyler Durden
Tyler Durden's picture

No they haven't. The rate of outflows from mutual funds to inflows into equity ETFs is 2:1, and that's being generous. The bulk of the asset allocation continues to be out of stocks and into bonds and money markets.

Thu, 01/10/2013 - 20:30 | 3142842 Rainman
Rainman's picture

you must tire of explaining this

Thu, 01/10/2013 - 20:34 | 3142849 PUD
PUD's picture

I will find the piece and post it for you as soon as I can.

Thu, 01/10/2013 - 21:36 | 3143044 CrashisOptimistic
CrashisOptimistic's picture

No, you won't.  I looked at this just a few days ago.

I tell Tyler he's wrong now and then and actually debate stuff in the comment threads with him, but he's not wrong here.

The flow is NOT into stock ETFs.  It's going to bonds.

Youngsters have forgotten that compound interest takes time and that defines who has the money.  Old folks are NOT GOING TO SWASHBUCKLE.  Your basic 80 year old distrusts new things like ETFs.

He's going to bonds, and frankly, he's not filled with a sense of safety there.  He is NOT going to stocks, or gold, or anything else that looks like it might destroy his retirement.

You think there's cash on the sidelines?  Maybe there is.  It's waiting to get into bonds.

Thu, 01/10/2013 - 20:44 | 3142886 donsluck
donsluck's picture

The two best investments for the last five years - cash (as in physical bills) and PMs (as in physical bars/coins). That is all that's left.

Thu, 01/10/2013 - 20:45 | 3142889 Thomas
Thomas's picture

The average folks haven't a clue that any increase in money on the sidelines comes from the Fed.

Thu, 01/10/2013 - 21:05 | 3142953 negative rates
negative rates's picture

Birds of the same feather, flock together.

Thu, 01/10/2013 - 20:47 | 3142897 Silver Garbage Man
Silver Garbage Man's picture

Out of stocks then bonds and money market then gold.

Thu, 01/10/2013 - 21:01 | 3142943 disabledvet
disabledvet's picture

Wow..."Tyler Durden says follow the dumb money." Really? Are you serious? The short sellers made their fortune in 2008 precisely BECAUSE money was flowing in at a breakneck pace. And so it is with the bulls: "they're minting money while all the rest of us are forced to redeem/load up on debt." YOU Tyler Durden(s) need to GET YOUR HEADS OUT OF THE CLOUDS. This..."esoterica" is NOT selling.

Thu, 01/10/2013 - 21:40 | 3143059 CrashisOptimistic
CrashisOptimistic's picture

And you continue to not learn the lesson that there ARE NO BULLS AND THERE ARE NO BEARS.

Computers don't have fur of any kind.  There is no one taking positions based on trends.  The HFT engines are just fighting with each other.  When it stops, you won't have any warning.

Thu, 01/10/2013 - 22:00 | 3143129 Poor Grogman
Poor Grogman's picture

"Computers don't have fur of any kind".

Actually not quite true, I cleaned out the fan in mine a while ago and it was so disgusting I thought a mouse had gone right through it.

Fri, 01/11/2013 - 00:24 | 3143406 TimmyM
TimmyM's picture

Of course this thing called TAG expired at YE. But it was easy to miss because the banks kept it quiet.

Sat, 01/12/2013 - 17:57 | 3147577 MeelionDollerBogus
MeelionDollerBogus's picture

well then next time save the link, take a screen-shot, get it ready for when it IS worth a zh reply.

that's just how it's done, biznatch.

Or you get one of the Tyler's in the ring :D apparently.

... vxx vs spy 02 zoomed in, see ...spy etf rolling chart forward - 2013 crash very soon


Thu, 01/10/2013 - 20:29 | 3142834 Doomer
Doomer's picture

Fed liabilities backed up by a bankrupt government.

Good as gold!

Thu, 01/10/2013 - 20:49 | 3142896 El Oregonian
El Oregonian's picture

"Fed liabilities backed up by a bankrupt government.

Good as gold!"


Fed Liabilities backed up by a criminal bankrupt government. 

Gold is Good!



Thu, 01/10/2013 - 20:28 | 3142835 Henry Chinaski
Henry Chinaski's picture

Keeping a substantial emergency fund roughly 1/3 local bank, 1/3 local credit union, 1/3 mattress. Cash diversification for modern times...

Also further diversified in tangible assets and the means to protect them.

Fear? Not!

Thu, 01/10/2013 - 20:58 | 3142930 fonzannoon
fonzannoon's picture

I don't see how you can compare 2013 to 2007 in any way with the fed in there as bigtime as they are. It seems to make it impossible for a PD to fail unless Spain etc. crumbles and a big bank gets caught with their pants down owning their debt.

Thu, 01/10/2013 - 21:05 | 3142954 disabledvet
disabledvet's picture

Yep. "to argue otherwise really is just sawing off the limb you just climbed out on." this is NOT to disparage gold however. "dollar cost a position."

Thu, 01/10/2013 - 20:30 | 3142844 Chartist
Chartist's picture

Here's the problem I have, normally the market doesn't let you out when you want out without a lot of pain....Investors have been able to get out at will without pain.

Thu, 01/10/2013 - 20:40 | 3142866 A82EBA
A82EBA's picture

any chance the pain may come from the bond side of things next?

Thu, 01/10/2013 - 20:36 | 3142854 Go Tribe
Go Tribe's picture

Better to buy old magazines, 30-round and higher.

Thu, 01/10/2013 - 20:37 | 3142860 Bicycle Repairman
Bicycle Repairman's picture

"progressive intelligentsia" = oxymoron.

Thu, 01/10/2013 - 21:59 | 3143121 Totentänzerlied
Totentänzerlied's picture

You seem confused.

Intelligent Intelligentisa = oxymoron

Intelligent Progressive = oxymoron

Progressize Intelligentsia = mundane fact

Thu, 01/10/2013 - 20:42 | 3142873 nbsharma
nbsharma's picture

Great point. As banks release earnings, this should be visible in their released numbers. Need to be on the lookout for further proof.

Thu, 01/10/2013 - 20:43 | 3142879 kalasend
kalasend's picture

Did Goldbug Tyler Durden just slapped the bitch out of every other Doom-Groom-Boom Tyler Durden's on ZH?

Thu, 01/10/2013 - 20:43 | 3142882 PUD
PUD's picture

Investors plowed more than $37 billion into U.S.-listed ETFs in September, the most since $29 billion of inflows in January of this year, as markets took to heart the Federal Reserve’s latest move to stimulate the economy with a fresh round of bond buying, and took on risk, particularly in equities

SPDR S&P 500 ETF(SPY) brought in more new cash than any other ETF, with $16 billion in flows, most of which came in December. Due its hyper-liquidity and the ability to trade SPY at low costs, traders tend to use it to rapidly place market bets, so flows into SPY are a good barometer of market sentiment.

Not saying that they didn't plow into bonds but they plowed into stock etfs too

Thu, 01/10/2013 - 21:51 | 3143088 Doomer
Doomer's picture

If you are going to quote a source, use quotation marks and give the source.


"traders tend to use it (SPY) to rapidly place market bets".   Hmmmm, "traders".   I wonder who these traders are? These traders wouldn't be looking for a greater fool to sell to, would they?


Thu, 01/10/2013 - 20:48 | 3142898 PUD
PUD's picture

ETF assets rise 2.1% in November to $1.32 trillion December 5, 2012, 5:35 PM

Assets in exchange-traded funds rose last month, with market’s largest 50 funds holding the lion’s share of the ETF market, according to data released Wednesday.

Total assets rose 2.1% to $1.32 trillion in November, pushing the market’s year-to-date total inflow to $161.1 billion, according to a report from Kevin Pleines at Birinyi Associates, a stock market research firm.

With $110.9 billion in market capitalization, the SPDR S&P 500 ETF TrustSPY +0.12% stayed as the largest fund, accounting for 8.4% of assets. The largest 50 funds account for 64.8% of all ETF assets, said Birinyi.

The second largest fund by market cap is SPDR Gold Trust GLD +0.03%, at $74.3 billion. While gold prices have pulled back recently, most exchange-traded fund investors are bullish on the metal heading into 2013.

The Vanguard Emerging Market ETF v VWO +0.07% was third largest ETF by market cap, at $56.7 billion. The emerging-market index and 21 other Vanguard funds will shift away from MSCI indexes in January, Vanguard said in  October, in a move aimed at keeping long-term expenses low.

Among the latest developments affecting the top 10 largest ETFs, the PowerShares QQQ Trust QQQ +0.05% will soon start tracking shares of Facebook Inc. FB +0.06%. Nasdaq OMX is adding the social-media company to the Nasdaq 100 index, as well as the Nasdaq 100 Equal Weighted Index and the Nasdaq Technology Sector Index. The moves will go into effect before the market opens on Dec. 12. Facebook will replace Infosys Ltd. INFY in the benchmarks.

The Birinyi report also showed U.S.-equity focused ETFs contributed $9.3 billion to the $20.7 billion in ETF flow of funds last month. Bond funds added $4.9 billion and foreign equity funds took in $3 billion.

Thu, 01/10/2013 - 20:50 | 3142902 PUD
PUD's picture

9 billion in stock 5 billion in bonds.

Thu, 01/10/2013 - 20:57 | 3142921 Tyler Durden
Tyler Durden's picture

$168 Billion in US equity retail fund outflows. Offset: $60 billion in US equity ETF inflows. ETF flows as of December 28:

Ratio: -3 to 1

Thu, 01/10/2013 - 21:00 | 3142939 PUD
PUD's picture

"asset class"  "equity" 107 billion?

Thu, 01/10/2013 - 21:01 | 3142941 Tyler Durden
Tyler Durden's picture

Great. Now the one missing one: "geography"

Thu, 01/10/2013 - 21:02 | 3142945 Rainman
Rainman's picture

PUD's posted explanation appears to be using the terms ' inflows ' and  'capital appreciation " or no ?

Fri, 01/11/2013 - 02:17 | 3143510 mark mchugh
mark mchugh's picture


I feel bad for him. He's not a troll or an idiot, he's just trying to understand, as we all are.

Here's a story dated January 20, 2012 saying SPY just became the first $100B ETF ($101.03 to be exact) That's $100B in Assets

SPY closed at 129.09 on Jan 20, 2012
SPY closed at 140.50 on Dec 5, 2012 (the date PUD sites)

So there's been an 8.8% (or $8.9B) gain in the NAV, and the article says SPY is now worth $110.9B.

Jan 20 - $101B
Dec 5 - $110.9B
Cap gains - $8.9B

Which means $1B in actual inflows in 11 months. To which I can only say Whoopty-friggin'-Do!!!

Here's where the story gets really, really interesting. If SPY actually had inflows of more than $1B, why isn't it reflected in their NAV?

The only possible answer is that they are skimming from their customers. Cashing out "excess" shares. I mean as long as they have adequate liquidity to replicate the index's returns, do they really have to invest the money?

Fri, 01/11/2013 - 02:34 | 3143525 mark mchugh
mark mchugh's picture

The Fed's flow of funds data confirms this ETF flow into equities:

(Table F.213)

Can anybody explain why these flows aren't reflected in ETF NAVs?

Thu, 01/10/2013 - 21:10 | 3142968 fonzannoon
fonzannoon's picture

Thanks Tyler I have been looking for that info. Thanks a lot.

Thu, 01/10/2013 - 21:11 | 3142969 disabledvet
disabledvet's picture

"it was a performance issue." Tyler Durden's ex girlfriend.

Thu, 01/10/2013 - 21:42 | 3143066 ekm
ekm's picture

Inflows are into Vanguard index fund types from locked in pension funds.

Members have no say, just the managers. This is like pensions seizure in Hungary.


Again, ETF stock inflows are NOT inflows, they are pension grab. 

Fri, 01/11/2013 - 06:53 | 3143652 Transitory
Transitory's picture

Do you have a link or graph to the sectors that the inflows are coming from, rather then where they aren't coming from? More concise then the feds flow of funds report (all 200+ pages of it).


I noted inflows from foreign investors into equities. Is this your thesis that JPM and co are funneling deposits through foreign offices, London etc, into equities?


Thanks, enjoying the series.


Edit - EKM answered first question above. Note to self - read EKM first. Totally consistent with changes in equity ownership %s. Question two still valid.


Thanks EKM.


Supporting evidence for EKM (changes in equity ownership).


Thu, 01/10/2013 - 20:49 | 3142900 Blue Horshoe Lo...
Blue Horshoe Loves Annacott Steel's picture

The Beatles released a new album:

"Ben Bernanke and His Magical Money Making Machine".

Thu, 01/10/2013 - 21:10 | 3142966 hooligan2009
hooligan2009's picture

bernanke's silver hammer?

Thu, 01/10/2013 - 20:53 | 3142906 H E D G E H O G
H E D G E H O G's picture

All these fucking thieves are doing is waiting behind the black curtain to dump their shitload of free taxpayer money into the market when the "DEBT CEILING SQUAKING" STARTS AND THE SO CALLED MARKET drops like a bag of gold from a sinking canoe. Damn, when in the Hell is the proverbial turd going to splatter the fan in this fraudulent country!? WE NEED A FUCKING REVOLUTION!

Thu, 01/10/2013 - 21:55 | 3143103 Doomer
Doomer's picture

When?  Maybe when the TVs go dark and Dominos stops delivering?

Until then, party on.

Thu, 01/10/2013 - 21:00 | 3142937 hooligan2009
hooligan2009's picture

the chinese might want out of their treasuries...keep a close eye on TIC data.

after all, if the Fed is buying $540 billion in treasuries a year (and 480 billion of Agency MBS for a round 1 trillion a year Fed purchase run rate - 45 billion per month of treasuries and 40 billion per month of MBS) and the deficit has a 1.3 trillion annual run rate we know that the government is still a net seller of around 65 billion a month (760 billion annual run rate).

someone has to buy this 760 billion, or the Fed has to step up, if the government is going to pay bankers bonuses, welfare benefits and foodstamps.

what are the odds that government spending is cut from a 3.6 trillion run rate to take up this 760 billion, or part of it?

SPartacus can remember when deficits of 600 billion were signs of the emergence of banana republic talk.

Fri, 01/11/2013 - 02:11 | 3143501 socalbeach
socalbeach's picture

Whoever the Fed purchased the MBS from could be buying $40b/mo of the approx $65b/mo in newly issued non-monetized Treasuries.  That would be similar to what John Hussman said happened in QE1:

The Destructive Implications of the Bailout - Understanding Equilibrium
"The Fed can acquire $1 trillion of commercial mortgage-backed securities and other assets from banks and create an equivalent amount of “reserves” (which is essentially printing money) at the same time that the Treasury issues the $1 trillion in new Treasury securities. In this case, which is in fact exactly what has happened, the banks that previously held $1 trillion in commercial debt securities can now use their newly acquired reserves to buy the $1 trillion in newly issued Treasuries."

Thu, 01/10/2013 - 21:05 | 3142955 Pareto
Pareto's picture

Its NEVER going to end.  EVER.  Its like a recurring nightmare, and everyday I wake up and ask, "where am I going to put my money?......besides PMs.  I already have enough of that shit to make me nervious, no offence PM bulls).  So, I have changed my investment philosophy a bit.  I'm electing to invest in people.  People I know who are doing entrepreneurial things, are short capital, but, have a decent business plan and a foreseeable probability of payback.  I figure since these people are in the business of trying to help other people move from a less to a more desired state, I'd rather lose it to them than to a market I no longer understand (and maybe never really did).  good luck on BTFD's.  I cannot pull the trigger on that shit no more.  But, I'm still gonna read ZH and the ZH'ers.

Thu, 01/10/2013 - 21:08 | 3142963 hooligan2009
hooligan2009's picture

You are Spartacus!

Thu, 01/10/2013 - 21:12 | 3142972 fonzannoon
fonzannoon's picture

Peer to peer lending. It's happening more than you think.

Thu, 01/10/2013 - 21:39 | 3143049 sunaJ
sunaJ's picture

I am the thankful recipient of such an investment.  One of the best relationships I have.  The trust and reward is beyond anything any money changer could dream of promising me.  I didn't know this guy a year ago and now he is family - I have no doubt he sees it the same way.

Thu, 01/10/2013 - 22:10 | 3143155 Melin
Melin's picture

garage banks are frowned upon. 

Thu, 01/10/2013 - 21:21 | 3142993 HD
HD's picture

I'm getting tired of playing this game. The only way we get a 10% or 20% NORMAL correction is what...a complete collapse of the system?


Thu, 01/10/2013 - 21:29 | 3143016 fonzannoon
fonzannoon's picture

HD there is a better chance of the market closing due to techincal difficulties followed by a massive Corzine at this point than a 20% natural correction happening.

Thu, 01/10/2013 - 21:49 | 3143084 HD
HD's picture

I can't argue with that. Which I find deeply disturbing...

The market has always been manipulated and run by criminals but they at least made the effort to hide it.  Now lying and stealing are official policy tools and in full view of everyone - and no one can do anything about it.

Thu, 01/10/2013 - 22:15 | 3143168 Doomer
Doomer's picture

Three words: debt ceiling debate

Fri, 01/11/2013 - 01:24 | 3143469 Things that go bump
Things that go bump's picture

Two words:  Executive order.

Fri, 01/11/2013 - 07:33 | 3143679 Poetic injustice
Poetic injustice's picture

One word: Confiscation.

Thu, 01/10/2013 - 21:29 | 3143013 haskelslocal
haskelslocal's picture

Perpetual increase in monies available to invest by banks in the market and.....

Offloaded by corporate officers as they cash out of the scheme?

That's what I see. $86 billion in 2012 alone withdrawn by officers for personal consumption which is about 2 months of QE.

So if I get this right, it's inflate the stocks, drain the companies of the cash, leave nothing but rotting carcasses and then..... And then?

Oh no.


Thu, 01/10/2013 - 21:36 | 3143047 q99x2
q99x2's picture

Once the banks own all the stock in all the compainies they can drop the market to nearly zero and pin the tail on the Bernanke.

Thu, 01/10/2013 - 21:47 | 3143078 JR
JR's picture

A game changer! Tyler. What a week! As Ron Paul said, we can change the mess we’re in with education - if we’re smart enough - with technology, with the Internet, i.e., with Tyler Durden and the Fight Club.

Imagine several partners own the printing press which prints dollars and these partners each in turn has a key that fits the gates to the treasury. They can print dollars or go into the treasury and pick up dollars.

What makes us think they are following some sort of pattern of ethics or fairness procedure in regard to regulation? They are operating a huge self-serve candy store; they are the owners and operators of the currency. They decide not only how much is to be in circulation, they juggle its value depending on who gets it, and, worse, they decide who gets it.

What is it that they don’t decide? Nothing!

The only difference from the banking cartel’s sordid past is it didn’t own Congress to this extent. And that’s in part what’s wrong. Nobody in government stands up against them. And, the younger generation of JPMs and GSers have become “public” thieves; they steal while you watch.

You look around and here goes one of them with the money.

Thu, 01/10/2013 - 21:48 | 3143081 ekm
ekm's picture

Let me explain this to everybody:


1) People who have bought up the whole market are the ones who have the money on the sidelines. Hence, there is zero dollar on the sidelines.

These institutions are called PRimary Dealers. These institutions have the both the stocks and the money on the sidelines. Again, this means that there is zero, absolutely zero, nada and zilch money on the side lines.


2) Inflows are into Vanguard index fund types from locked in pension funds. Members have no say, just the managers. This is like pensions seizure in Hungary.

Again, ETF stock inflows are NOT inflows, they are pension grab. 


Is the issue settled or do you guys have more questions?

Thu, 01/10/2013 - 22:07 | 3143143 Doomer
Doomer's picture

For how long can the circle jerk go on?

Thu, 01/10/2013 - 22:18 | 3143156 ekm
ekm's picture

1) NYSE went bankrupt

2) CME and Nasdaq are going NYSE's way.


3) This is the trick. Crude oil price.


4) Final: Only Obama can call the crash. Until then, it will be like this. Same stocks changing hands between primary dealers in dark pools same as in 1930s.

George Bush was the one who called the crash in 2008, by actually releasing all that crude oil from tankers into the real economy.

Fri, 01/11/2013 - 00:06 | 3143389 TonyCoitus
TonyCoitus's picture

Sorry, no comprendo.

So the primary dealers have all the money on the sidelines, but there is no money on the sidelines.

Call me dense, I have thick skin, but I still don' understand.

Fri, 01/11/2013 - 00:34 | 3143425 ekm
ekm's picture

Money is worth when you buy something. Primary delers have bought up anything that was for sale.

Money left is good for nothing. Most of stocks are bought. It could go to crude oil, but that's where the order from Obama would arrive to stop.

That's what I mean by 'there's no money in the sidelines'. It means there's nothing left to buy. The money at the reserves is like money in a desert island, Robinson Cruzoe money.

Fri, 01/11/2013 - 12:01 | 3144280 roadhazard
roadhazard's picture

I think it's a hoot that anyone thinks a POTUS is in command of anything.

Fri, 01/11/2013 - 03:49 | 3143574 mt paul
mt paul's picture

there is no money

" on the sideline "

unless the fed puts it there

Thu, 01/10/2013 - 21:51 | 3143090 buzzsaw99
buzzsaw99's picture

Need another NYSE margin debt update.

Thu, 01/10/2013 - 22:03 | 3143138 Doomer
Doomer's picture

Move along, nothing to see there.

Thu, 01/10/2013 - 22:07 | 3143145 ekm
ekm's picture

NYSE went bankrupt few weeks ago.


Thu, 01/10/2013 - 21:51 | 3143091 ekm
ekm's picture

I've been saying what ZH is saying today it's been since Nov 2011 after the global bailout by simply using common sense. If nobody is buying, then Primary Dealers are buying.


Somebody has got to give me credit here.

Thu, 01/10/2013 - 21:57 | 3143111 haskelslocal
haskelslocal's picture

Okay, net zero. But what about those corporate titans who are withdrawing hand over fist at first chance? ZH has produced for years now (all though it's been a while) lists of the sell/buy ratio of stocks and it's been as high as an obsurd 3100:1. Is the chunk they're running away with insignificant in the scheme of things?

Also, wouuldn't it suggest sucker fishing your way on the back of a whale?

Thu, 01/10/2013 - 22:03 | 3143136 ekm
ekm's picture

I would call it more like that show, THE WEAKEST LINK.

The wolves are eating each others up. The so called titans are simply dancing as long as music goes on same as Citibank's CEO in 2007.

Fri, 01/11/2013 - 03:54 | 3143575 mt paul
mt paul's picture

companies get free money from Fed   ZERP

buy back shares , reduce the float

stock prices rise..sound fimilar 

Fri, 01/11/2013 - 09:23 | 3143820 andrewp111
andrewp111's picture

Corporate titans always sell. They are compensated in stock.

Thu, 01/10/2013 - 21:59 | 3143120 Ned Zeppelin
Ned Zeppelin's picture

Looks like the same spike occurred in September 2012. Any comment on that?

Thu, 01/10/2013 - 22:07 | 3143146 AgLand
AgLand's picture

This cash movement coincided with two events:

2) the end of the $5million tax-free gift tax exclusion window

1) the end of lower capital gains taxes, and this the sale of many assets held long term like businesses or AlGore's CurrentTV.

And that would account for plenty of stox being cashed in so money could be distributed out.

Thu, 01/10/2013 - 22:21 | 3143189 Doomer
Doomer's picture

The $5 million exemption was made permanent.  Maybe the threat of it ending had an effect.

Thu, 01/10/2013 - 22:25 | 3143197 haskelslocal
haskelslocal's picture

You're suggesting large withdraws on stock sales? Who was the buyer and why has the market gone up if it was a buyers market?

Thu, 01/10/2013 - 22:49 | 3143241 Honest_Money
Honest_Money's picture

"Deposits" used to ramp stocks and short gold futures...gotta love the illusion of a strong economy and low inflation.

Thu, 01/10/2013 - 23:07 | 3143282 DollarDive
DollarDive's picture

The crash in 2008 started when the commercial paper market started to seize up.  Investors that had bought into the crap pseudo money market shit that was AAA, good as cash and paid 5%, when bank rates were at 0%.  That market seized  up when clients couldn't liquidate.  

Think similar situation to today.  Commercial paper market could still seize up  but FED is bulging with bonds, much more than in 2008.  They've also managed to piss off the public.  Public is already frustrated with the fucked up system.  This is different than 2008.  Nobody expected anything like what happened.... this time will be worse.

Maybe it will start with commercial paper again this time.  Short dated IOU's from companies that are not guaranteed.... Are these things still guaranteed by the FED ? I lost track.  I don't think so.  

With the printing presses  retaining the ability to print at will - it would seem that the only thing that could spook markets would be a rise in rates.... failed auctions.  We may be closer to this than you think.  There's a ton of these refi's coming in 2013... all it takes is one.

That's something that the FED, Congress, Obama cannot stop.

Fri, 01/11/2013 - 01:36 | 3143479 AynRandFan
AynRandFan's picture

There is no down.  If the Fed can do what this article suggests, we are simply pawns of an entirely rigged game.  When we buy or sell paper assets, we are simply a statistical blip on a gigantic ledger of paper assets that move around via computer simulation and have nothing at all to do with actual assets.

There is no supply and demand.  There is only money.

Fri, 01/11/2013 - 03:42 | 3143569 bk1037
bk1037's picture

I thought I had seen a ZH article recently showing the Fed is still substantially supporting the commerical paper market, perhaps Tyler can correct me if I am mistaken.

That would explain on top of QE why the collective financial world waits on baited breath about these Fed proclamations. Pulling down support for commercial paper would fuck up many organizations instantly, much as it threatened to do in the days in the aftermath of Lehman which we still witness to this day. That is the problem with Fed dependencies in a market in a nutshell, how do you come off the mother's teat once that market is dependent on it. Markets that did not need or were not dependent on the Fed before now would be dead without it, imagine real estate without the Fed's activities as an example and it is still bad enough.

The show will be over when they lose control on being able to keep interest rates down, when the vigilantes demand more and the Treasuries become noncompetitive in auction unless they are willing to jack the coupon or offset the paltry effective yield in some other way (reduced demand for crappy yield, lower demand lower purchase cost, higher yield). I wouldnt invest in UST for crummy yield on that basis alone and for the life of me I am glad there are others that are so spooked that money floods to UST when there is a riskoff move. Everyone needs to borrow money, the debt based society and western civilization, how soon before borrowers stop playing nice and go aggressively for funds competing on interest rates? How long? Late this year? 2014? 2015? That is when the bigger bubble wiill bust and the losers for funds begin to go belly up in larger numbers than what we have seen.

This article is evidencing that deflation is still winning over hyperinflation in the battle post Great Recession. Deposits would not surge like this if there were attractive returns in the marketplace, and where hyperinflation dollars would be chasing the same amount of goods. Since that isn't happening, deflation is still winning out and likely will for some time unless major wealth somwhow gets back into the hands of the American public, as we saw back in the 1960s or so with positive income equality. I don't expect this to happen until there's a collapse this time. Matter of when not if.



Thu, 01/10/2013 - 23:25 | 3143319 WallowaMountainMan
WallowaMountainMan's picture

so, as the fed tries to reduce the flow of the 85 b, the stock market must sell to the bottom, trying to get the 'money' out of the paper stocks traded on the exchanes?

so, since a trivial % of selling drops the markets' 'prices' for stocks to zero dollars.

all the worries about inflation disappear into dispare.....retirement funds and etc holders make a killing...?

just a guess...


Fri, 01/11/2013 - 00:10 | 3143396 joego1
joego1's picture

I think the whole mess is going to blow by 2015 . The whole global economy will melt down. That means we have to make stuff again. Invest in learning the skills and having some equipment and materials stashed away could boot strap a future business after the bullets stop flying. Shoes and TP?

Fri, 01/11/2013 - 00:16 | 3143403 holdbuysell
holdbuysell's picture

Would be interesting to understand if deposits at a credit union or local community bank result in those deposits finding their way back into the stock market (investments). Methinks 'no' as long as the bank/CU doesn't have an investment arm (simply checking/savings/possibly IRA CD accounts).



Fri, 01/11/2013 - 06:04 | 3143644 yrbmegr
yrbmegr's picture

I bet they do.  The CU doesn't stick those deposits in a mattress.

Fri, 01/11/2013 - 00:31 | 3143423 fuu
fuu's picture

"If the sellers of the securities were customers, the banks would make payment by crediting the customers' transaction accounts;"

Also known as the Corzine Account.

Do the sellers even need to be informed that they sold anything?

Fri, 01/11/2013 - 00:48 | 3143444 jonjon831983
jonjon831983's picture

So then retail is shocked and sees the market going up and up and so they try to push their way back in... and that's when the trap is sprung?

Fri, 01/11/2013 - 01:31 | 3143473 AynRandFan
AynRandFan's picture

More than any idea or article I've seen since 2008, this one has really stuck in my craw.  In essence, and if true, the Fed is not only able of propping up the Treasury market but also propping up the entire stock market also through a shell game of creating money out of thin air and using it to both buy bonds and stocks through its surrogates.  

Doesn't this validate the progressive premise that money is unlimited?  Doesn't this negate the entire foundation of contract law and debt?

I guess we the people are just so damn stupid that we can be led to believe there is any freedom or concept of value anymore.  I'm disgusted.

Fri, 01/11/2013 - 06:01 | 3143642 yrbmegr
yrbmegr's picture

What this really says is that we use something called a "dollar" to represent value in our economy, and a "dollar" can be created out of thin air at the whim of the Federal Reserve.  It calls into question what the value of a "dollar" really is.  But then we already knew all that.

Fri, 01/11/2013 - 02:44 | 3143530 dunce
dunce's picture

Doing away with Glass Steagal was a huge mistake at the behest of bankers claiming they could not compete. The banks were finding ways around it but that was no excuse to do away with it. Politicians for sale.

Fri, 01/11/2013 - 07:53 | 3143696 Miss Expectations
Miss Expectations's picture

Mistake?  Thieves wanting the doors unlocked was no mistake...Glass Steagal's repeal simply explains Bill Clinton's Father of the Year award.

Fri, 01/11/2013 - 12:09 | 3144320 roadhazard
roadhazard's picture

Clinton gets the blame for the signature but Rep. Sen. Phil Gramm is the baby-daddy with last second Omnibus Bill stuffing... and Congress for not aborting it. It was a gang bang.

Fri, 01/11/2013 - 05:28 | 3143621 boredbutdeadly
boredbutdeadly's picture

I'm a little confused by this article.

I "get" the whole savings inflows thing.

But if these savings inflows show up as "excess reserves," then doesn't this mean that they HAVE NOT been deployed elsewere (in stocks, bonds, etc.)  Otherwise, they would show up somewhere else on Bank balance sheets, wouldn't they (not in central bank deposits or vault cash). 

Fri, 01/11/2013 - 09:42 | 3143871 Goner
Goner's picture

I am by no means an expert and just learning but I think the issue is fractional reserve banking.

So if you deposit 10K into a bank. Two things happen

1) The Banks deposit goes up 10K

2) The bank can now use 9K of that to buy coke, hookers, stocks or anything else it feels like.

So a rise in deposits means other asset classes rise ALSO. Thats the point of the article as I read it. You may think you are going to put your 10k in a bank account to keep it safe but all that does is give the bank even more monopoly money to risk

There is more to it of course

Fri, 01/11/2013 - 05:59 | 3143640 yrbmegr
yrbmegr's picture

Who doesn't know that banks use deposits to make investments?  The new part is that the Federal Reserve now buys at face value all the worthless paper the banks end up owning.  Lather, rinse, repeat  I think the Fed is starting to see this cycle as unsustainable.  They are starting to look like Lehman Bros. writ large.

Fri, 01/11/2013 - 09:05 | 3143781 toros
toros's picture

according to this banks only own 1% of the equity market.


Fri, 01/11/2013 - 10:18 | 3143970 EZYJET PILOT
EZYJET PILOT's picture

When these PD's front run the Fed by buying up T bills, are they earning much of a profit during the transaction? I realise they borrow from the Fed for free then splash out on treasuries but where does this money come from? Is it part of the 2 trillion they have in excess reserves or is it fresh money given to them by the Fed?

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