M2 Surge Moderates, "Only" Increases By $42.2 Billion In Past Week
Following last week's near record surge in M2, which was merely the result of a complete panic in markets resulting in a scramble for deposit accounts out of money markets (these tumbled by $82.5 billion in the week to $1688.5 billion, the lowest since September 2007) and other "unsafe" venues, amounting to $159.1 billion, this week M2 has risen by a far more modest (though still abnormally high by historic standards) $42.2 billion. What is disturbing is that unlike in the past when record surges in commercial bank savings deposits have seen a prompt unwind in the following week, this time around last week's $58.4 billion spike in such money was followed by another massive $51.7 billion, as cash ran to the "safety" of FDIC insurance. And just as disturbing, the huge $99.3 billion in additions to plain vanilla demand deposits did not see any unwind, with just $8.3 billion leaving bank teller windows in the past week. End result: M2 has just hit another new all time high of just over $9.5 trillion (which helped today's LEI number beat expectations). And if QE3 proceeds as planned, and it US consumers actually start borrowing, this number is going much, much higher. Which will be bullish, for makers of wheelbarrows.
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