Skip to comments.U.S. money supply plunges at 1930s pace as Obama eyes fresh stimulus
Posted on 05/27/2010 11:21:12 AM PDT by Dubya-M-DeesWent2SyriaStupid!
The 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.
By Ambrose Evans-Pritchard Published: 9:40PM BST 26 May 2010
Reverse side of a US twenty dollar bill matched up with the north side of the White House in Washington, DC The stock of money in the US 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 Photo: AFP
The 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.
(Excerpt) Read more at telegraph.co.uk ...
He is insane! FUBO!
Where is it going?
Yeah, but money in the 30’s was backed with silver. Now we have magic happy-money, so no more worries.
DEPRESSION... believe me yet?
To Obama’s slush funds and fake glabal warming crap.
AKA the dems Bahama homes and Gore;s new lear jets.
Our media ONCE again FAILS at reporting this...
The Fed doesn’t publish the M3 number anymore. Everyone estimates it slightly differently. Another source I read says the M3 is staying steady.
The good news is he’s committing political suicide. The bad news is he’s destroying America in the process.
Where are these M3 numbers coming from?
I thought the Feds stopped tracking M3 years ago.
It does not take a rocket scientist to see that we must plunge into a deep depression in order for Obama to get
he and Soros’ dream of globalization=global communism.
Global warming failed to be the culprit because they got busted with the fraud that it is. So we must all suffer.
Would someone please explain to me where this thinking came from that we can spend our way out of debt?
Who in their right mind would think that would work? I mean are these people completely stupid?
>> are these people completely stupid? <<
No, they are not stupid. Thay know EXACTLY what they are doing. That’s what scares the crap out of me.
The bad news is our system is going to collapse and we are printing money out of thin air.
The good news is everyone else is even worse and are scrambling to buy our dollars.
Whats in this bill? Aside from about $55 billion in unemployment benefit extensions, the bill includes:
* $65 billion in Medicare physician payments the so-called doc fix that Democrats left out of ObamaCare so that it could be officially scored as a deficit-reducing act rather than a deficit-ballooning one;
* $24 billion in Medicaid funding for states so that they can keep up with the unfunded mandates they already faced, much less the additional ones that will flow from ObamaCare;
* $1 billion for summer jobs for 16- to 24-year-olds, which effectively is an admission from the feds that the market couldnt support the minimum wage increases forced upon employers starting in 2007 (the unemployment rate for this age group has hit 25 percent);
* corporate subsidies for recipients including, according to The Wall Street Journal, municipal bond traders, cotton farmers, yarn producers, sheep growers, Hawaiian sugar cane cooperatives, motor sports businesses, renewable energy firms, the steel lobby, and so on.
The money is sitting in bank vaults(computer Hard drives). Nobody wants it, even at 4.5%/30 yrs. Remember the song "I'm turning Japanese, I think I'm turning Japenese I reaaly think so!"
Yeah! That's the real problem.
Add that China OWNS us and NKorea and China are joining at the hip with a weeny seated U.S. President and a failure of a SOS Clinton.
By the time America FEELS this pain gas will be at 4 bucks and climbing and Obama and his cronies will be loading up their private bank accounts.
Maybe my lack of interest in spending is reducing velocity (Finally!).
How’s being at zer0 wrong?
Propitiatory estimates. In other words take it with a grain of salt.
Exactly, they’ve been hiding the decline for years...
"So, its been 15 months since the passage of the big stimulus bill, which has since been increased by $75 billion to a total of $862 billion and which, to hear Democrats tell it, has been a great big success. Yet, were still talking about emergency deficit spending in a single bill that nearly equals the entire federal deficit for 2007. With that kind of success, its no wonder they didnt want to call this one another stimulus.
I’m thinking that with a few million $$$$ from zer0’s stash, I could much more easily go completely Galt and buy the whole darn Gulch.
LOL, Dude, you are ON to it.
Yep, it’s “funny money” alright...
Now THAT says IT ALL!!!
Never doubted you
I’ve mentioned missing George Washington a number of times here on FR and elsewhere.
Amazing. These guys are the best Con-Men in history or...The American population is the stupidest in history.
Im sure in the fine print of the new stimulus bill is further funding for endangered rats and ACORN.
It seems to me that fiscal stimulus in the face of a collapsing money supply should be the poster child for pushing a rope uphill. The more the feds borrow to pour into the economy, the more is absorbed by the banking system to shore up its reserves.
“I think this chart tells the real story- that we’ve more than doubled our monetary base in the last couple of years. How can anyone really believe that we’re headed towards deflation? “
I think we are in fact dealing with deflation due to the outrageous bubble that formed in the housing market and its associated industries. The inflation of the cost of houses has to be set back to reality. The fact of the matter is, is that we have way more houses than we need. More supply and less demand equals lower costs = deflation.
The one thing about M3 is that it does not include the amount of money held in the bank’s vaults that is not being used. That is why we are experiencing deflation despite the massive amount of money being pumped out by the central banks. Because no one wants or can get access to that money. Its just sitting there and its not counted in M3.
What i find insane, is that they are going to eventually succeed in creating hyper-inflation because they are not taking this money off the street. They are doing everything they can to try to put it on the street and get it moving. If they succeed, hello hyperinflation.
Historically, hyperinflation is the path central banks/governments choose to get out of massive debt. So this handles two short-term goals of those in power (politicians and the central banks), keep the people burning money and make your debt cost less.
I agree that short term deflation is a possibility, but in the long run hyperinflation looks like it’s a certainty.
Great! Push harder on the Go pedal and give it all the gas it wants!
Race to the bottom brings us to the top faster.
Many others continue to use the same formula; it isn’t magic, it’s the “broadest” of the money supply measures; it’s explained at http://en.wikipedia.org/wiki/Money_supply
For a chart, go to www.shadowstats.com and click on the money supply chart.
Many of us have been seing this coming; it’s well known that Greenspan/Geithner have long worried about a Deflationary spiral. Part of the problem is the “velocity” of money, i.e., the amount of money changing hands. It’s not because the Banks aren’t lending.
Actually the St. Louis Chart reflects the amount of money, and “credit” created and pumped into the economy by the Fed; not the amount of money actually in circulation and held in deposits. A better definition is: “The Federal Reserve Bank of St. Louis’ adjusted monetary base combines in a single index Federal Reserve actions that affect the supply base money — open market operations, discount window lending and unsterilized foreign exchange market intervention — with actions that affect depository institutions’ demand for base money — changes in statutory reserve requirements. The adjusted monetary base equals the sum of the monetary base and a reserve adjustment magnitude (RAM) that maps changes in reserve requirements into equivalent changes in the (unadjusted) monetary base. This paper presents a revised measure of the adjusted total reserves component of the monetary base and a new RAM. The revised measure of the adjusted reserves component differs from the current measure by including the aggregate amount of depository institutions’ required clearing balance contracts with the Federal Reserve. The new RAM differs from the current RAM by recognizing that, since the Monetary Control Act of 1980, an increasing number of depository institutions have not significantly changed their demand for base money (vault cash and Federal Reserve deposits) relative to transactions deposits following changes in statutory reserve requirements. The new adjusted reserves data suggest that the stance of monetary policy, measured by the growth rate of adjusted reserves, has been more volatile since 1980 then suggested by the current measure.”
So.....it represents what the Feds have been doing to pump money into the economy. Where’s it all gone? Loss write downs and repayments of TARP. It’s gone right back to the Fed.
The problem is that many of the old economic formulas using the velocity of money weren't updated with the speed of electronic money factored in.
The actual speed that money changes hands now is down to milliseconds in some cases. I can put an item for sale on Ebay and it literally can sell in a few seconds I can then take my Paypal and pay a bill electronically seconds after the Ebay transaction wherein the bank I paid the money to now has it available for a loan. That entire transaction starting with the sale to loan availability can literally be done in under 10 seconds.
15 years ago (or less) the same transaction string would have taken weeks. Now that loans have tightened up and Credit Cards are tightened up these breakneck electronic transactions are ceasing. (Lots of folks have no Credit Limit left on their Credit Cards because each time they pay down the balance 1000 bucks the Credit Card company lowers there credit limit by 1000 bucks. Thus their ability to make electronic transactions is nil and they resort to cash which slows down the present day velocity of money by magnitudes!
What about Japan? Declining population, and long-term deflation pressure, which will be spreading elsewhere. Demand is simply not going to match what it is now.
The Fed is fighting the market right now to keep inflating money away to stave off a deflationary spiral.
What are their options?
1, print money.
2, loan money through bailouts. Short-term inflationary pressure, long term deflationary pressure, as the debts hamstring further bailouts.
3, increase taxes. Short term deflationary pressure.
Their biggest tool against deflation is rate cuts, and that’s all spent. They can only borrow so much, before they start hitting the deflationary power of debt. They will borrow to the point, 100 percent, 200 percent of existing US GDP. That gives them a buffer of about 14 trillion dollars or so, given a deficit of about 1.4 trillion a year, that gives them 10 years.
Raising taxes, that hurts them short term, and undoes the purpose of the stimulus.
There aren’t really any good choice out there for Obama to deal with this structural deflation.
We are currently experiencing deflation. And i agree that the end game is hyper inflation. The powers seem to be hellbent on it.