Money supply is now contracting

[Rajiv]

Courtesy Gordon T. Long

THIS IS A BIG DEAL, with absolutely no media coverage!

Pay particular attention to the fact we are below the Zero Line for M3 and near for M2

From Shadowstats

[*T*]

Re: Money supply is now contracting

Yep.

[Anon21456]

Re: Money supply is now contracting

This could be deflationary... In fact, some say that this IS deflation. Mish anyone ?
Is that a good or bad thing ? What asset prices are affected ?

[jpatter666]

Re: Money supply is now contracting

I'm not sure I'd go that far. Perhaps a drawdown of the ridiculous expansion of the supply over the past few years......

[globaleconomicollaps]

Re: Money supply is now contracting

As was pointed out in another thread recently, this is what immediately preceded the sharp spike up in inflation in Argentina and was accompanied by the de-peg from the dollar.

[jtabeb]

Re: Money supply is now contracting

Umm, what do we de-peg from here? ;)

[thriftyandboringinohio]

Re: Money supply is now contracting

This could be deflationary... In fact, some say that this IS deflation. Mish anyone ?...

A chart that looks just the same could be drawn for a little town on a big river just after the crest of a huge flood. It would be titled "Daily Local Water Level Growth". The devastation would be still unfolding, and when the water was gone nobody would look at the mess and call it "drought damage". This looks to me like the diminishing of inflationary inputs, which is a long way from deflationary inputs.

[Supercilious]

Re: Money supply is now contracting

Umm, what do we de-peg from here? ;)

Obviously, we de-peg the yuan
That should do it.

[Slimprofits]

Re: Money supply is now contracting

This explains why I've been getting old twenty dollar bills from the banks again.

[radon]

Re: Money supply is now contracting

A chart that looks just the same could be drawn for a little town on a big river just after the crest of a huge flood. It would be titled "Daily Local Water Level Growth". The devastation would be still unfolding, and when the water was gone nobody would look at the mess and call it "drought damage". This looks to me like the diminishing of inflationary inputs, which is a long way from deflationary inputs.

Agreed. Nobody is borrowing because there is hardly anything left to fund that is profitable. As return on investment continues to decline so will the demand for credit.

[thunderdownunder]

Re: Money supply is now contracting

Dont trust the graph (any graphs)
M3 is paper money in circulation -paper and coin - 60% is overseas in countries that don't trust the local mula(and your not getting it back till it's worth less (oops my bad) They didn't waste money on actually printing that toilet paper so thats real greenbacks being sucked out
M2 is money including paper but other forms as well (substitutes for cash) - Is a Credit Card a substitute for cash Hmmmmmm (Yah not supposed to pay it back- just pay interest - Leon you loser)
If they fall you they say you get deflation - but if less in circulation is chasing the same amount of goods - well I think it is obvious what will happen.Hint "first by deflation and then by inflation you will wake up with nothing" or something along those lines
No matter what - its going to suck someone down the sinkhole.
Me thinks it's those goddamn tea party Folk and the Southern yokels buying whiskey and guns and burying the leftover cash in the root cellar - Yehah bring it on you yella belly's.:p
P.s The sites good now its fixed for a troll down and who wants to bet Greece is in default before I get laid by a lose Englishwoman with great Tits (and thats soon) ( Frig I got to buy Viagra - see yah)

[Rajiv]

Re: Money supply is now contracting

From Money supply

• M0: The total of all physical currency, plus accounts at the central bank that can be exchanged for physical currency.
• M1: The total of all physical currency part of bank reserves + the amount in demand accounts ("checking" or "current" accounts).
• M2: M1 + most savings accounts, money market accounts, retail money market mutual funds,and small denomination time deposits (certificates of deposit of under $100,000).
• M3: M2 + all other CDs (large time deposits, institutional money market mutual fund balances), deposits of eurodollars and repurchase agreements.

[bart]

Re: Money supply is now contracting

Courtesy Gordon T. Long

THIS IS A BIG DEAL, with absolutely no media coverage!

Pay particular attention to the fact we are below the Zero Line for M3 and near for M2

From Shadowstats

True enough on it not getting much media coverage currently, but there was some about 2 months ago when John Williams noted it and sent out press releases etc. My original one is also on a thread in my section, and I think I even noted it on a thread myself around the same time.

I seldom toot my own horn... but my M3 reconstruction preceded ShadowStats reconstruction by about 3 months and was the first in the world, it tends to lead the one from ShadowStats (it crossed below zero last October), its also generated weekly - plus has a 4 week moving average to roughly parallel John's monthly reconstruction and for comparison.

I don't make a big deal out of it since its a sort of a hobby for me to do things like that, and John Williams makes his living via consulting and ShadowStats. etc.

From Money supply

I urge large caution on using only M0 through M3 as "money supply". That Wikipedia link also notes that there are more definitions of money supply than M0-M3.

To take it a few steps further, one of the few things that all economic schools agree on is a basic definition of money - a medium of exchange. To be even simpler, money has to be able to "buy" things.

So, since one can buy things with a credit card or bank credit or other loans, and the government (Federal, state and local) buys things all the time with the increasing debt load, I submit that both all credit and all government debt is also money and should be counted in "money supply".

Taking it even further, the actual net amount of US based derivatives per the Treasury (currently at least $17 trillion) can also buy things, and also should be counted in "money supply".

Additionally, there are a number of other things that are used as money - for example, newly issued stock that's used to buy another company is literally a medium of exchange (and I may hear some major disagreements about that... c'est la vie).


... and it just so happens that I have a chart that totals up M3, all credit, government debt & derivatives and that has also been adjusted for some inevitable double counting... plus has also been adjusted for debt deflation. It does not include things like newly issued stock.

The bottom line - it's far from contracting:

[Rajiv]

Re: Money supply is now contracting

I believe the biggie there may be derivatives. Thankfully, all they appear to be doing is inflating the Stock market. But they are mostly offsetting derivatives (I believe thatyou are using the notional value of derivatives,) and the net net on that is very difficult to arrive at.

I would make a similar argument used for the purchase of corporations using freshly minted shares. The net contribution to money supply is fairly hard to get to. The closing price for a stock can be exchanged for the cash value only for a very small percentage of issued shares - so, the conversion from shares to cash is very dicey indeed.

[bart]

Re: Money supply is now contracting

The current notional value of US based derivatives is well over $170 trillion, and I never use that figure except in raw derivatives only charts.

I derived the net (non notional) value by using the BIS derivatives ratios, which are published bi-annually.


That "full" money supply chart sure puts M3 into perspective too - ~$14 trillion isn't a very big portion of ~$78 trillion.


I used that newly issued stock example mostly to go way out there, in hopes that my overall point about what money supply (per the K.I.S.S. principle) actually is would be more easily understood - even if folk disagree.


One additional observation that adds a lot of credence to it - drawing a trend line on the dollar value (the black line) from 5/08 to 1/09 shows that it got broken roughly in 4/09, right after the stock market bottom.