Chart(s) Of The Day: Follow Where The Money Was, Is, And Will (Not) Be

Tyler Durden's picture

There is no shortage of money in the world. Thanks to global Central Banks' extreme activism money supply has exploded. Since August 2011, the Fed has been less of a full-time player in this effort but in passing the baton, the rest of the world did not let them down with most notably the ECB having taken over with its own version of free-money printing for much of the first quarter - driving the ratio of outside (central-bank-driven) money relative to inside (the bank themselves creating money via credit) to record highs as a stealth nationalization of credit is underway (though as we noted earlier this morning - the transmission mechanism is not working). So where oh where is all that hard-earned free-money going? The story bifurcates here. In the US, non-financial corporates have grown their war-chests as high as they have ever been (and continue to do so) after being burned by short-term financing stresses and knowing (despite all outward media appearances) that the next abyss is potentially around the corner (given real-life growth estimates becoming more and more binary/extreme as opposed to normalized with a range). In Europe, the 'excess' has flowed to the core driving, as Sean Corrigan notes, what some surveys suggest is a consumer and housing boom (read mal-allocation of capital once again) in the decade-long stagnant German real-estate market. All that extra cash, however, while helping revenues and margins for non-financial corporates in the US has left wage growth languishing. So the sad reality of the Keynesian 'multiplier' dogma is that rather than garbage-in, garbage-out - it is freshly printed money-in, nothing-out-to-the-real-economy as each actor in the game becomes increasingly driven by a sense of self-preservation. Is it any wonder that energy/raw materials prices (as evidenced most recently by Whirlpool's comments this morning) are rising when firms are awash in cash? But of course, as the old-saying goes, a-biflation-a-day-keeps-the-Fed-hawks-at-bay.

Real Money Supply growth is running well ahead of any empirical trend-line, thanks to central bank largesse...

Recently the Fed has taken a small step back (but money supply growth - red line below - remains stable in the US)...

But the ECB took over the mantle and replaced the banks as the ratio of Bank Money/Credit to ECB Money/credit crashed, as the stealth nationalization of credit continues...

But all that money has gone to one of two places - bank reserves at their central banks or more critically the balance sheets of non-financial corporates...

But as we know, this has done nothing for wage growth (lower pane - which stands well below any kind of empirical peak in growth - in fact sliding for over a decade now) while revenues (upper pane) have exploded (as have margins for the obvious reason) ending the miracle of the Central Bank transmission mechanism that solves all ills...

So summing up - Where has the cash come from? Central Banks. Where has it gone? Bank reserves and non-financial corporate balance sheet 'war-chests'. Where is it going? Nowhere into the real economy.

Charts: Sean Corrigan of Diapason Commodities