M3 has shrunk at an annual rate of 6.5pc over the last three months, a pace of contraction not seen since the 1930s
Bank lending to firms and households in the eurozone has fallen for the first time, raising fears of an economic relapse and a slide into deflation next year.
By Ambrose Evans-Pritchard | 27 Oct 2009
The Telegraph
Data from the European Central Bank shows that the M3 broad money supply has contracted over the last six months, confounding expectations that ultra-low interest rates would soon boost monetary growth. Loans to the private sector fell 0.3pc from a year earlier, the first such decline since the data started in 1983.
The M3 figures include a wide range of bank accounts. They are watched closely by experts for early warnings about the economy a year or so ahead.
The picture is even starker in America where M3 has shrunk at an annual rate of 6.5pc over the last three months, a pace of contraction not seen since the 1930s. US bank loans have plummeted since May.
Michael Taylor from Lombard Street Research said the eurozone was "blundering towards deflation". Inflation was minus 0.3pc in September, but unevenly distributed. Prices fell 3pc in Ireland, 1.8pc in Portugal, and 1pc in Spain. "All the ingredients are there for deflation next year. At some stage this may start alarm bells ringing at the ECB," he said.
output
Isn't gov co stimulating non
Isn't gov co stimulating non productive sectors, education and healthcare? It's been stimulating housing with cheap interest rates and tax credits so that home prices have risen or not fallen as much as they should. And in paying banks not to loan, rather than raise interest rates, has created more taxpayer debt.
Just wait until they pass
Just wait until they pass another stimulus bill, bailout, or a trillion dollar health care reform bill
trillion...
there are tens of trillions more of credit destruction in the pipe--- a trillion of printing or stimulating wont mean a damn thing...
i don't know why that is eluding some of you...
Theory? Please give feedback/criticism
I was wondering if this could at all be meaningful. Please give feedback and criticism to this theory.
Since the 3rd quarter of 2008, GDP was on the decline until this past quarter where we saw a 3.5% growth. The decline we saw was greater than 6.5%, which is the amount the M3 supply supposedly contracted by in the past 3 months. I am not sure what the M3 growth rate was in this past year, but it had to have been pretty big with TARP and the TALF lending programs. If we take all factors into consideration (negative GDP growth, M3 growth) and then look at this decline in the M3 growth, should we really be worried about deflation, or is inflation in fact still a possibility. It seems that even though M3 could have contracted due to this report, that the growth in M3 within the past year is still greater than GDP growth, which will lead to inflation and not deflation.
US GDP growth chart- http://www.bea.gov/newsre...
M3
I thought the Fed stopped publishing M3 data. Where can we find that information?
The components are readily available to reconstruct M3.
Here is a graphical representation:
http://www.nowandfutures....
That was my understanding as well.
Isn't the M3 money supply unknown? Or perhaps the numbers are only not released to the public. That would be convenient.
Evans-Pritchard
He had another excellent story yesterday on Japan
It is Japan we should be worrying about, not America
http://www.telegraph.co.u...
After "Audit the Fed"
Our next move needs to be "Abolish Legal Tender." Competing currencies are our only hope.
Look at this reconstruction of M3.
http://www.nowandfutures....
It clearly shows the dramatic decrease in M3 rate of growth. We are clearly are experiencing progressively declining rates. The dramatic title of this thread shows a mover volatile picture because they use just a three month comparison instead of a broader year on year rate of change.
You can see just looking at the chart that after the beginning of 2010 we should hit negative rates of growth, actual contraction of the supply. Add to this the fall in the velocity of money movement and more conservative bank lending practices and you can see we are in the early stages of a deflationary spiral, which in my view should last until 2015.
We are just entering the final bubble, gold and silver which should last until this time next year taking gold up to $2,000 before that bubble burst also.
Money velocity is hokum
Read dis heah.
Think in extremes
What would happen today if everyone decided to hold every penny they had for 90 days instead of spending? Would this freeze in spending have no effect?
Let us say that the federal government borrows newly created money from the banks, and spends it. In the extreme, if everyone who received this money, out of fear, decided to hold it indefinitely instead of spending it there would be an effect; the newly created money would be frozen. What would this do to the demand for goods and services. Wouldn't inventory sit on shelves instead of being bought with this newly created money?
So let us not be so extreme, and instead say that people who receive this newly created money didn't permanently hold it, but did hold it 90 days longer than they normally would. This would still withdraw bids from the market place temporarily and prices should drop, would they not. Right now we see real estate sitting on the market for much longer than normal periods and most of it doesn't move at all unless the price is dropped; isn't this the effect of reduced demand whether it comes from people not being able to get newly created money or people deciding not to spend the money they now hold?
So if reduced spending comes from either less money in circulation, or people sitting on money the effect is the same, lower prices. I think this is so obvious that it astounds me that someone can write a contorted article claiming that the speed at which money is spent is meaningless, and get people to believe it.
@Paul Revere I'm logged in
@Paul Revere
I can't get a link to send you an email when I click on your name. Would you contact me so I can send you an email back? Got a question for ya...
go ahead and try again....
i had to update...
Hmmm
If I'm not mistaken, the US stopped publishing M3 numbers years ago, so I'm not sure what numbers Ambrose is pulling from.
http://www.federalreserve...
Also, if M3 has declined 6.5% in the last few months and yet the dollar continues to fall and commodities prices continue to climb, I would be very very concerned what that really means.
I can tell you that the central banks & governments will cook the books until the cows come home.
http://www.shadowstats.co...
Shadow Stats has the M3
Shadow Stats has the M3 growing at 2%. That's a far cry from the 17% a few months ago, but still increasing. M1 however (base money) is through the roof. It's mostly sitting in reserve accounts at the Fed. Tick, tick, tick...
M3 and how it is used in the piece
That it was talking about the M3 component part without including the M1 and M2 within the M3. So the printing of money to buy us t bills (and toxic assets) is blowing up the M1 and M2 components to compensate. That is my assumption at least.
I now see an interesting pattern regarding M3 publications. Officialy M3 is not published but foriegn central banks like ECB or the Mexico Central Bank reference the US M3 in press releases now and then. It is like they still have access to the data - via inter central bank communications.
M3 is pretty much available from other US Fed official sources if you know how to piece it back together - This is what I think Shadowstats does very well.
I suggest you go over to
I suggest you go over to shadow stats dot com and get an education...
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
i suggest you read this article...
i go to shadowstats all the time---
money is pumped and then it is hoarded---
there is no money velocity---
and meanwhile--- lots and lots of credit is being destroyed---
we are only getting started....
http://www.shadowstats.co...
dude.... give it up... if
dude.... give it up... if the government printed 23 trillion to bail out the banks and for tarp how did the money supply shrink... the government can spend the money into circulation.... it does not have to be loaned...
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
what do they spend it on....
that money is not being lent....
bernanke has tried everything he said he would do to thwart deflation....
it has all failed....
i dont care what you want to believe--- i would research this more if i were you....
and maybe follow the advice you quote from proverbs 22:3...
also.. don't worry about
also.. don't worry about me... deflation/inflation I will do just fine... you on the other hand better watch your dollars..they are buying less and less everyday..
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
It is possible for both
The USD to collapse and become worthless AND for systemic deflation to occur. All that has to happen is that the money supply deflates enough that people lose faith in the ability to collect FRN's to pay back debt. Currencies can collapse from both circumstances - either because there are too many dollars chasing goods or because there are too little.
I don't think we are going to see either of those for several years, if not a decade. However gold will not go up in value as this thing keeps on going. Have you SEEN the COT reports coming out of the futures floors?
Interest rates can also go up in a deflationary environment:
http://www.investophoria....
I agree.. please let me know
I agree.. please let me know what the cots are saying I have not had a chance yet to see them?? have the shorts been piling on? if so we could see gold etc go down.. but its not because of "deflation" it is pure manipulation since those shorts on gold and silver are held 80% or more by 1 or 2 large US banks.. then China is on the other side...
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
what do they spend it on...
what do they spend it on... welfare, social security, defense spending.. nasa, servicing the debt. etc etc etc.. IT DOES NOT HAVE TO BE LENT!
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
more and more stimulus.
more and more stimulus. buying more and more assets
what assets....
........
stimulus for what---
they will push for round two---
if they get it it will fail-- there will be no more round three---
we are living in very dire times....
i hope that we can make it through the other side...
There certainly can be round
There certainly can be round three. The Fed can BUY REAL ESTATE. They can PAY OFF MORTGAGES. They could buy cars just to blow them up. They can do just about anything to debase the dollar.
why dont you go argue with the experts...
http://theautomaticearth....
there is a comments section---
or you can email them with your problems and arguments...
they can answer your questions...
Honestly, I have a read a
Honestly, I have a read a ton on this issue and I have not decided either way. I think it is a political guess. Political scientists could decide between inflation or deflation better than economists can.
what is most advantageous to
what is most advantageous to the politician?? inflate or die....
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
Exactly... its not being multiplied...
because it is being used to aggressively trade and naked short the markets in order to make as much as possible to offset all the TOXIC ASSSETS they are holding. Velocity of money is a very important factor. If the banks were holding no TOXIC ASSETS, then they could multiply the NEW money and loan out 10x the amount... however if for every dollar they get in NEW money they are hoarding because they have TOXIC ASSETS, then all we have done is given the banks money thus ensuring they don't have to clean anything their books or practices up.
The Liberty a society retains is inversely proportional to the number of Lawyers in the Government.
yep, its all about what the
yep, its all about what the government wants to do. The whole inflation/deflation deal is speculating what the government will do.
we dont have to guess at what they will do...
just read the news!!!!!
their efforts have failed---
they will attempt another stimulus--- that will fail--- by then deflation will haveits grip--- unemployment will keep rising---
the commercial realestate will explode--- just like sub prime--- they are due to reset in the coming months.... this will lead to more defaults-- more contracting---
etc....
that is the nature of deflationary spirals...
Paul Revere
How many federal reserve notes do you own?
Their efforts have failed
Their efforts have failed because of quantitative, not qualitative reasons. If they continue they will "succeed". The central bank has NOT gone all out. You will know they have gone all out when 1 dollar is worth 1 of today's pennies.
http://www.safehaven.com/...
they cant make money move....
they can try--- but the amounts are too great...
the game is over-- it is up to you to save your ass---
not to convince me that i am wrong....
i have followed the advice of the people at autoearth---
i am out of all debt--- i am renting--- and i have cash....
how to build a lifeboat:
http://theautomaticearth....
theoretically I guess it is
theoretically I guess it is possible that they could not print and spend money fast enough. Considering how easy printing and spending is to do, we are really really screwed if that is the case.
exactly---
and why i have decided to err on the side of caution with my money and my life--- rather than insisting that deflation is not happening----
it is truly a scary prospect....
Given that real estate is one of the principal assets of most
people, I can understand why there is reluctance to listen to the deflation arguments. Denial is a good defense.
It would not be unusual for real estate to lose 80% of its peak value during the unwinding of a major binge, and given that we just experienced the greatest real estate bubble on record, 90% loss in value would not be beyond possible. Already in some areas, the values have already come down by 40% or so.
Leveraging one's investment risk by borrowing can be a wonderful thing in an bull market, but in a bear market it is hell. Who wants to even consider that this is a possibility. If you want to see an interesting study in denial, watch that Real Estate Intervention show on cable tv.
And who wants to consider that their bank account could get wiped out in a massive wave of bank failures that could not be backstopped by a bankrupt FDIC.
There will be all sorts of twists and turns as this debt unwinding progresses. Instead of admonishing our children not to play with matches, maybe we should in the future warn them not to play with debt based fiat.