Posted on 05/26/2010 5:52:00 PM PDT by bruinbirdman
M3 money supply in the United States is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history.
M3 figures - which include broad range of bank accounts and are tracked by British and European monetarists for warning signals about the direction of the US economy a year or so in advance - began shrinking last summer. The pace has since quickened.
The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc. The assets of insitutional money market funds fell at a 37pc rate, the sharpest drop ever.
"It’s frightening," said Professor Tim Congdon from International Monetary Research. "The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly," he said.
The US authorities have an entirely different explanation for the failure of stimulus measures to gain full traction. They are opting instead for yet further doses of Keynesian spending, despite warnings from the IMF that the gross public debt of the US will reach 97pc of GDP next year and 110pc by 2015.
Larry Summers, President Barack Obama’s top economic adviser, has asked Congress to "grit its teeth" and approve a fresh fiscal boost of $200bn to keep growth on track. "We are nearly 8m jobs short of normal employment. For millions of Americans the economic emergency grinds on," he said.
David Rosenberg from Gluskin Sheff said the White House appears to have reversed course just weeks after
(Excerpt) Read more at telegraph.co.uk ...
We're in for a very major deflationary depression.
THIS is deflation. It will counteract inflation, but is an effect of devestating fiscal troubles.
Exactly correct
Does that mean I can get my Mercedes for $1,000?
Don’t be fooled.
Hyperinflation is coming, and coming soon.
and now they are short of cash? they cant find it , is that what this is?
If/when that money is put back in the system, Katey bar the Door on inflation.
Someone help me out here--is that about right? No one wants to spend because of what they correctly perceive as coming Hussein oppression of their productivity.
Some of us who have plenty of money are not spending because we want to starve the beast and collapse the system, i.e. “going Galt”.
First there was the FDR (aka Great) Depression, and now ...
the Obama Depression
Funny how depressions only seem to happen when Democrats/liberals are in control.
I can not SCREAM loud enough at how this enrages me! Can’t wait until November!!!-—It’d be a great birthday present to me to get a strong conservative congress back!
Second Tuesday in November is the 9th? Results will be the 10th, my B-Day!
A good Veterans' Day (11th) celebration, too.
yitbos
Plenty of work to do before then
Only in government can failed policies be explained by not being big enough or too short in duration.
Right. Take a look at the multipler charts at the St. Louis Fed site. The multiplier is the velocity in which the cash rolls through the monetary system. If people/banks are hoarding it then the supply itself is not necessarily inflationary. However, as you mention, when they start to lend it out inflation will commence IF the excess supply is not drained. Bernanke has a highwire act to pull off.
[If/when that money is put back in the system, Katey bar the Door on inflation.]
We are moving our family trust money into Canadian and Australian dollars because the future is unpredictable. The GDP is M times V (the dollars in the system times their turnover). That means increasing the money supply may counterintuitively be deflationary if it causes the collapse in turnover because of fear that any loaned money will never come back.
But then you get a musical chairs situation where people don’t want to be stuck holding this sludge. So yes, that is the Katey Bar The Door moment.
It hardly matters, just hunker down because either way we are screwed.
Folks, we are going down at breakneck speed under the worst POTUS the country has ever had. Nothing nationally or internationally is headed in the right direction whether economic, wars, threat of wars, private sector jobs, debt control or international relations, etc.. We are naked without any meaningful or directed leadership. Oh, yes, POTUS Obama is done, he is toast, and so are many Democrats, but not before they have put us all on the ledge of destruction. We might as well be in Chavez’s Venezuela, Castro’s Cuba or a sub-Sahara African dictatorship. The America we once knew is no more, thanks to ourselves!!! The America destroyers and haters are in control!!!
I think there is a simpler explanation. My memory is a bit dodgy on the specifics, but here goes... Early in the credit crisis, a ton of folks had $$ in money market accounts which were not FDIC insured. If the markets truly cratered, folks could have lost that money and the calamity from that event would have been devastating. The Feds came in and said that people weren’t going to lose the money they had in such accounts to calm folks down - but a change had to be made some day.
Now, the feds are changing the rules for money market accounts, so people are moving their $$ out, hence the steep drop off. Now, they may be buying gold, bullets and dried food, I don’t know, but I don’t think this is as bad as the article suggests.
There’s some additional information here:
http://www.bankingandfinancelawreport.com/2010/02/articles/bank-regulation/regulatory-changes-for-money-market-funds/
That’s a sure recipe for a depression. A person needs to worry about the future of this country.
It would be rather easy if Bernanke and the FOMC targeted a moderate slope for the yield curve.
Right now it's business creation that needs to be stimulated. Slash regulations and it wouldn't require much money at all.
“so the banks got what 1T or 23 T or whatever Mr T....”
This is where it going...
http://seekingalpha.com/article/163891-a-quick-note-on-notional-derivatives-exposure
Keeping that game from grenading the foundations out of Western Banking and government....
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