M2 Update: First Decline After 16 Consecutive Increases

Typically at this time on Thursday we present our weekly Fed balance sheet update. At this point, that particular data is irrelevant as what the Fed's assets look like today, is nothing compared to what they will look like in 8 months, when the Fed will own more Treasuries than China and Japan combined. So instead we present the M2 update, where after 16 consecutive weeks of increases, M2 has finally dipped. Oddly enough, this occurs just before the Fed went balls to the well in buying EVERYTHING.

As the chart below demonstrates, as of October 25, M2 was $8,763.8 billion, a decline of $9.5 billion from the week before.

In terms of actual monetary components, the decline was predicated by a rise across all M1 items (currency, demand deposits and other checkable deposits), while of the M2 components, the only increase was at savings deposits at thrifts, while savings deposits at commercial banks, as well as small denomination time deposits and retail money funds all declined. This was surprising as this was the first decline of commercial savings accounts in over two months.

Bottom line is that none of this is relevant: unless the Fed can stop the collapse in the shadow banking system, what happens in M1 or M2 is without impact. Yet a drop in M2 is certainly not something the Fed wants to see at a time when it needs to stimulate (hyper)inflation and kill the dollar at all costs. Which is why all those who wish to see the Fed's effort fail, should not only not go out and buy worthless trinkets, but take their money out of the bank, and keep it under the mattresor better yet buy those assets which continue to outperforming stocks for a second year in a row: namely commodities and more specifically, precious metals.