M2 Surge Moderates, "Only" Increases By $42.2 Billion In Past Week

Tyler Durden's picture

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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greased up deaf guy's picture

move along... nothing to see here...

Manthong's picture

An awful lot of negative interest being earned out there.

speconomist's picture

The great moderation is here!

navy62802's picture

Meanwhile, gold is up $70-ish per ounce over the past 24 hours (currrently at $1864.80).

zorba THE GREEK's picture

We won't need wheelbarrows for long, as I'm sure there are already plans to make higher denomination U.S. notes.

When you think about it, $100 bills are the largest notes used in the U.S. for quite a while. Even though there were

$1000 notes and $500 notes issued up until the 1934 series, they were not widely used and disappeared from circulation 

by the early 1970's. $100 notes have been widely used in the U.S. for over 100 years and have lost over 95% of their

purchasing power since then. If it wasn't for credit cards, $1000 notes would have been re-introduced long ago.

If the Fed continues it's monetization, we should be seeing $1000 notes before the end of the decade.

mayhem_korner's picture

The chart is a seismograph for inflation...

El Viejo's picture

While it is true that M2 correlates somewhat to inflation, doesn't there have to be an aggregate demand? (this ain't the 70s when the boomers were buying everything in sight and corps were hamstrung with taxes and regulation) Plus, NAIRU usually suggests less correlation of Inflation to M2 when unemployment is high.