JPM Sees "Most Extreme Ever Excess Liquidity" Bubble After $3 Trillion "Created" In First 9 Months Of 2013

Tyler Durden's picture


JPM's Nikolaos Panigirtzoglou, editor of the "Flows and Liquidity" weekly research piece, is one of the greater experts on, not surprisingly, global monetary flows and liquidity. Which as we noted back in 2009, is all that matters in a world in which the micro, and recently the macro, have all been made obsolete by one simple thing: credit-money creation by the monetary authorities. Which is why we read with interest his latest edition in which he sets off to answer a not so simple question: "how much liquidity is there?" What he finds is disturbing.

From JPM:

Excess money supply is currently at record high positive territory. The residual of the regression turned positive in May 2012 and has risen steadily since then. This is both because of real money supply increasing and money demand decreasing due to lower uncertainty (Figure 3). In particular, global M2 is up $3tr or 4.6% since the beginning of the year (to September), outperforming the Global CPI inflation index which is up by only 2% since then. Global M2 reached $66tr in September this year.


Of the $3tr increase in global M2 money supply in the first three quarters of the year, around $1tr is due to G4 countries, i.e. US, Euro area, UK and  Japan. The remaining $2tr is due to EM countries, driven by strong bank lending growth in EM. As we highlighted last week, EM bank loan credit creation has been unaffected by the EM selloff in the summer and was running in July/August at a $170bn per month pace. So strong credit growth in EM economies continues to boost our measure of excess liquidity.


And the conclusion:

The rise in excess liquidity, i.e. the residual in the model of Figure 4, is supportive for risky assets especially when we compare the past nine months with the period between the end of 2010 and the beginning of 2012 when excess money supply was negative. Looking further back in Figure 4, we can see three major episodes of excess liquidity (i.e. positive residual): 1993-1995, 2001-2006 and Oct 2008-Sep 2010. These were periods of strong asset price inflation suggesting that excess liquidity could have been a factor supporting markets at the time. The current episode of excess liquidity, which began in May 2012, appears to have been the most extreme ever in terms of its magnitude.

To summarize:

  • In just the first 9 months of 2013, DM countries have injected $1 trillion in liquidity sourced exclusively by central banks; EMs have injected another $2 trillion driven by bank loan demand.
  • The total global M2 is over $66 trillion, growing at an annualized pace of over 6%.
  • The amount of excess liquidity, i.e. the infamous "liquidity bubble" in the global fungible system is "the most extreme ever in terms of its magnitude"

And that's really all there is to know: the music is playing and everyone has to dance... just don't ask what happens when the music ends.

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Mon, 10/28/2013 - 15:05 | 4098552 LawsofPhysics
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Exponential equations are a bitch.  but I am sure Jamie know this...

Mon, 10/28/2013 - 15:10 | 4098570 Joe Davola
Joe Davola's picture

The music never has to end, like the 4th side of Metal Machine Music.

Mon, 10/28/2013 - 15:16 | 4098589 Boris Alatovkrap
Boris Alatovkrap's picture

"Surprise, surprise, surprise..." as Boris is attempt to make shock face expression.

Mon, 10/28/2013 - 15:18 | 4098595 King_of_simpletons
King_of_simpletons's picture

This is not extreme. It is Exceptional. We should be grateful that we are still the richest country in the world without considering all our debt and liabilities, of course.

Mon, 10/28/2013 - 15:27 | 4098634 Manthong
Manthong's picture

It’s just a good thing there are so many Chinese, Russians and Indians that prefer our paper and electronic abstractions to barbarous relics and other deflated hard assets.

Mon, 10/28/2013 - 15:51 | 4098721 ParkAveFlasher
ParkAveFlasher's picture

I will not sell my miners today.  I will not sell my miners today. I will not sell my miners today. I will not sell my miners today. I will not sell my miners today. I will not sell my miners today. I will not sell my miners today. I will not sell my miners today. I will not sell my miners today. I will not sell my miners today. I will not sell my miners today. I will not sell my miners today. I will not sell my miners today. I will not sell my miners today. I will not sell my miners today. I will not sell my miners today. I will not sell my miners today. I will not sell my miners today. I will not sell my miners today. I will not sell my miners today. I will not sell my miners today. I will not sell my miners today. I will not sell my miners today. I will not sell my miners today.

Mon, 10/28/2013 - 16:23 | 4098853 beegle
beegle's picture

yeah i know the feeling , hang in there man , you wont fall alone thats for sure , this is 'nam dude


Mon, 10/28/2013 - 16:35 | 4098899 HoofHearted
HoofHearted's picture

It looks like Bernanke, Yellen, Timmay, and Obama have been in here junking all the good comments. What a bunch of dipshits they are...

Mon, 10/28/2013 - 17:35 | 4099047 macholatte
macholatte's picture



Keep your eye on the target.  Total government control is the objective. It is more difficult with Red Team players on the field. Approaching the election of 11/14 look for even greater ramps and outlandish lies and Gestapo tactics, silencing any/all opposition. If Progressives take both houses again, the collapse could happen before Hillary gets elected. They have not yet begun to fight.


"Radicals must be resilient, adaptable to shifting political circumstances, and sensitive enough to the process of action and reaction to avoid being trapped by their own tactics and forced to travel a road not of their choosing."

"A Marxist begins with his prime truth that all evils are caused by the exploitation of the proletariat by the capitalists. From this he logically proceeds to the revolution to end capitalism, then into the third stage of reorganization into a new social order of the dictatorship of the proletariat, and finally the last stage -- the political paradise of communism."  

"An organizer working in and for an open society is in an ideological dilemma to begin with, he does not have a fixed truth -- truth to him is relative and changing; everything to him is relative and changing.... To the extent that he is free from the shackles of dogma, he can respond to the realities of the widely different situations...."

--  Saul Alynski


Mon, 10/28/2013 - 18:04 | 4099172 Herd Redirectio...
Herd Redirection Committee's picture

I made about 50% on a small trade on an Argentinean gas company, the sensation was so unusual I sold some of my position and bought a junior Mexican silver miner's shares.    Because they are the lowest I have ever seen!

Mon, 10/28/2013 - 22:19 | 4100011 Boris Alatovkrap
Boris Alatovkrap's picture

You must try invest in copper mine!

Mon, 10/28/2013 - 17:03 | 4099016 WOAR
WOAR's picture

All shorts and no longs make Jack a poor boy?

Mon, 10/28/2013 - 15:35 | 4098658 Headbanger
Headbanger's picture

I say again... THE CRASH IS UPON US!  

And thank you Obama you ass hat!

Mon, 10/28/2013 - 15:45 | 4098692 Chupacabra-322
Chupacabra-322's picture

Liquidity? How, through Osmosis? Thie greatest 100 year Ponzi of all time is ending. Prepare accordingly.

Mon, 10/28/2013 - 16:01 | 4098719 Say What Again
Say What Again's picture

Something is very wrong in the land of oz, otherwise know as the market.

We are witnessing a sell-off in the closing hour of the regular session.  This just can't happer.  What next -- is the sky going to fall?


UPDATE:  Never mind -- Stick save in the final 5 minutes of the regular session.

Mon, 10/28/2013 - 17:17 | 4099046 walküre
walküre's picture

Every day is Groundhog Day since March 2009

Mon, 10/28/2013 - 15:52 | 4098725 NoDebt
NoDebt's picture

HB-  Ok, you've been on this subject all day.  You got somethin', or is this one of those "gut feel" things?  If it's just gut feel, you might want to check the expiration dates on your milk and eggs first.


Mon, 10/28/2013 - 16:22 | 4098850 Keyser
Keyser's picture

I'm with HB on this one, but it's a slow motion collapse and we are in the passenger seat. The unstoppable force is a about to meet the immovable object. 


Mon, 10/28/2013 - 17:30 | 4099078 walküre
walküre's picture

Think about it. As long as the elite is not suffering and gets everything they could ever dream of, there will be no collapse of any sort. When the elite either fears for their lives or sees their wealth evaporate due to government actions, they cannot control we might see a change in direction.

Maybe Obamageddon is the catalyst to a massive exit of wealth from the US. He's been good to the elite so far but hey, perhaps he was just fattening up the elite to make their slaughter more profitable. There's no way the elite will either agree with a commie Dollar or a crappy health care system in their own backyard.

Watch what the elite does.

Mon, 10/28/2013 - 15:45 | 4098695 ziggy59
ziggy59's picture

Tyler, Is that picture of Al "Mr. Magoo" Greenspan with hair??

Mon, 10/28/2013 - 15:59 | 4098762 Say What Again
Say What Again's picture

I was just about to post about the subliminal images on the bubble.  I see a dog and a large jungle cat.

Mon, 10/28/2013 - 20:09 | 4099586 TwoHoot
TwoHoot's picture

The problem here is our central bank can print money but they can't print tortillas.

Do they print tortillas in Russia?

If so, I may move there.

Mon, 10/28/2013 - 15:17 | 4098594 Herd Redirectio...
Herd Redirection Committee's picture

The analogy of a bubble is actually insufficient for our purposes.  Because TWO things can happen.  A bubble must pop.

But the market doesn't have to pop.  Instead, the currency can 'pop'.

Mon, 10/28/2013 - 15:38 | 4098665 Winston Churchill
Winston Churchill's picture

Party like its Zimbabwe.

Mon, 10/28/2013 - 16:26 | 4098866 gatorengineer
gatorengineer's picture

Or perhaps like the universe it can expand for ever

Mon, 10/28/2013 - 15:12 | 4098578 doctor10
doctor10's picture

looks like we have a burn rate on how fast that 750T-1quadtrillion worth of derivatives that the central banks cary on their books are detonating.

Mon, 10/28/2013 - 16:24 | 4098857 Keyser
Keyser's picture

I liken it to a bottle of nitroglycerin, just waiting for the slightest jolt before going off and taking the entire derivatives market along with it. 


Mon, 10/28/2013 - 16:47 | 4098951 Winston Churchill
Winston Churchill's picture

Freeze it.

Nitro ice cubes are extremely stable.

Do not mix with the regular ones !

About time to start an ice delivery company in the Hamptons.

Mon, 10/28/2013 - 15:22 | 4098604 Kirk2NCC1701
Kirk2NCC1701's picture

@LoP: "Exponential equations are a bitch.  but I am sure Jamie know this..."

So is having to write checks backed by real bank balances and having real collateral.  But the rest of us know this...

Mon, 10/28/2013 - 15:23 | 4098614 LawsofPhysics
LawsofPhysics's picture

"Real Collateral" - LMFAO!  With "mark to fantasy" accounting this can be anything.  This is why Jamie is "richer than you".

Mon, 10/28/2013 - 16:07 | 4098795 Bangin7GramRocks
Bangin7GramRocks's picture

I saw Jamie drive up in his Escalade and buy cigarettes, beer and seafood with his government handout.

Mon, 10/28/2013 - 16:17 | 4098832 SILVERGEDDON

Jamie Dimon karioke. " We pay Fine, Fine, Fine, 'till all our lawsuits go away - ay - aay ! "

Sincere apologies to the Beach Boys. 

Mon, 10/28/2013 - 15:05 | 4098557 Super Broccoli
Super Broccoli's picture

aaaaawww JPM start saying shit after it got fined 13 bl ... how awkward ;-)

Mon, 10/28/2013 - 16:27 | 4098868 Keyser
Keyser's picture

How can anyone believe JPM anymore with their call to sell gold in Qtr 1 & 2, while they were buying hand over fist pretty much puts them in the scumbag category. 


Mon, 10/28/2013 - 17:34 | 4099083 Citxmech
Citxmech's picture

Of course what JPM says, at least in my mind, takes a back seat to revelation that GLOBAL M2 is apparently increasing at 6%/yr - which is a doubling rate of less than 12 years.  We're what - 6 years into this cycle?  Think of what that will do to commodity prices over the next 6 years. . . 

Mon, 10/28/2013 - 15:07 | 4098562 heinrich6666
heinrich6666's picture

I don't mind. As long as WilliamBanzai is making his shitty Photoshops, I feel all right.


Mon, 10/28/2013 - 15:09 | 4098571 DaddyO
DaddyO's picture

Can you spell douche? h-e-i-n-r-i-c-h-6-6-6-6

How come all the WB7 haters all the sudden, always quick to criticize, nothing pertinent or educational to add...


Mon, 10/28/2013 - 15:15 | 4098586 Herd Redirectio...
Herd Redirection Committee's picture

Haters will hate.  Bill knows.

Mon, 10/28/2013 - 16:25 | 4098849 NoDebt
NoDebt's picture

ZH is on somebody's website hit-list, and that includes WB7 now.  About the time the Obamacare website debacle starting kicking into high gear there's been a notable up-tick in inexplicably pro-Obama and pro-Obamacare posts/replies.  Also the "down-arrow boys" have been rolling through various threads much more frequently.

Look up and down this thread for a minute at the down arrows.  Notice a pattern?  Like EVERY DAMNED POST?  OK, so heinrich6666 had it coming to him, but I mean everyone else who isn't acting like a douchebag.

And it's been happening with increasing frequency.

Mon, 10/28/2013 - 20:07 | 4099571 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

When the ship is imploding they always pull this shit. The more threatened they feel the more they strike back like a cornered rat. There has been a notable uptick in the usual FEMA death camps, martial law, they want to take our guns propaganda they like to plant that the conspiracy theory sites that don't vette anything just run with wholesale. Trigger discipline they are trying to get us to make a bad move to justify going full retard Draconian to save their precious.

Mon, 10/28/2013 - 15:20 | 4098602 superflex
superflex's picture

Somebodies panties are all wadded up in their vajayjay.

Mon, 10/28/2013 - 15:12 | 4098573 Devotional
Devotional's picture

why don't you, heinrich666, go muff Yellen?

Mon, 10/28/2013 - 15:10 | 4098574 Charles Nelson ...
Charles Nelson Reilly's picture

you're like the douchebag that shows up to a gang bang with AIDS.

Mon, 10/28/2013 - 15:13 | 4098579 Grande Tetons
Grande Tetons's picture


Show us your work.

I love fucking gold.  

Mon, 10/28/2013 - 16:17 | 4098833 daveO
daveO's picture


Remember Goldfinger?

Mon, 10/28/2013 - 20:08 | 4099580 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

I think brownfinger or stinkfinger is more appropiate for that one.

Mon, 10/28/2013 - 17:17 | 4099042 superflex
superflex's picture

Me too.

Bought a St. Gauden's double eagle over the weekend at an estate auction under spot.

Mon, 10/28/2013 - 17:46 | 4099121 stant
stant's picture

another low brow zher hits the red kitty

Mon, 10/28/2013 - 15:08 | 4098564 6th of May
6th of May's picture

They just want you to short the market!  

NEEEEVEEEER!! I will be long and party with you JPM bitchez!


Mon, 10/28/2013 - 15:13 | 4098566 ebworthen
ebworthen's picture

Let's see, when the music stops and JPM doesn't have a chair - the FED, the Treasury, and the CONgress will kick future generations out of a chair to make sure JPM and any other TBTF bank has one?

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