U.S. M-2 money supply fell $20.3 bln Dec 22 week

NEW YORK, Jan 2 (Reuters) - U.S. M-2 money supply fell by $20.3 billion in the Dec. 22 week to $6.034.5 billion, the Federal Reserve said on Friday. The Fed said the four-week moving average of M-2 was $6,049.0 billion vs $6.055.0 billion in the previous week. Following are the details of the money supply report, and the Fed's H.3 and H.4 reports: . One week ended December 22 (billions dlrs) . Latest Change Prev week Rvsd from M-1....1,288.2 down....1.8 vs 1,290.0.....1,290.0 M-2....6,034.5 down...20.3 vs 6,054.8.....6,054.8 M-3....8,798.0 down...30.4 vs 8,828.4.....8,828.3 M-2 Avg 4 wks (Vs Wk ago)..6,049.0 vs.....6,055.0 Monthly aggregates (Adjusted avgs in billions) M-1 (Nov vs Oct)..........1,282.0 vs.....1,286.9 M-2 (Nov vs Oct)..........6,071.0 vs.....6,091.9 M-3 (Nov vs Oct)..........8,861.5 vs.....8,896.1 . Federal Reserve's H.3 and H.4 report: . Two Weeks Ended December 24 daily avgs-mlns (H.3) Free Reserves.........rvsd...1,901 vs..rvsd....1,274 Bank Borrowings..54 vs.............36 Seasonal Loans...35 vs.............25 Excess Reserves..............1,955 vs..........1,310 Required Reserves (Adj).....40,231 vs.........43,328 Required Reserves...........40,697 vs.........41,959 Total Reserves..............42,634 vs.........43,269 Non-Borrowed Reserves.......42,580 vs.........43,233 Monetary Base (Unadj)......737,363 vs........734,325 . Two Weeks Ended December 24 daily avgs-mlns Total Vault Cash......rvsd..44,285 vs.........42,576 Inc Cash Equal to Req Res...31,847 vs.........31,860 . One week ended December 31 (H4.1) Bank Borrowings...65 down...........5 Primary Credit....32 down...........1 Secondary Credit.nil vs..........unch Seasonal Credit...33 down...........4 Adjustment Credit...............nil vs..........unch Float..........1,183 up...........761 Balances/Adjustments.........12,112 down..........42 Currency.....723,714 up.........5,068 Treasury Deposits.............5,850 up.........1,149 . One week ended December 31 - daily avgs-mlns Fed bank credit.............746,570 up.........7,055 Treasuries held outright....666,402 up...........368 Agencies held outright..........nil vs..........unch Repos ........38,679 up.........5,500 Other Fed assets.............40,242 up...........432 Other Fed liabilities........20,589 down.........170 Other deposits with Fed.........319 up............72 Foreign deposits..99 up.............3 Gold stock....11,043 vs..........unch Custody holdings..........1,066,742 vs.....1,060,521 . Factors on December 31 Bank borrowings...63 vs...........174 Float...........-315 vs.........2,061

Why the money is shrinking is somewhat controversial. I've not read any detailed consistent explanations. The Fed might know but doesn't want to say, or doesn't know why or what to do about it. Some Austrian economists argue it is shrinking because the Fed is inflating (printing money), but they don't give a detailed explanation of how it is shrinking either.

Start here at Money supply - Wikipedia

Look up words here:
Campbell R. Harvey's Hypertextual Finance Glossary

Background definition of money supply measures:

M1
Measure of the U.S. money stock that consists of currency held by the public, travelers checks, demand deposits and other checkable deposits including NOW (negotiable order of withdrawal) and ATS (automatic transfer service) account balances and share draft account balances at credit unions.

MZM
Money Zero Maturity The Federal Reserve Bank of St. Louis' measure of money stock including currency in circulation, demand and other checkable deposits and institutional money funds. MZM differs from M1 in that it includes "sweep" accounts (institutional money funds).

M2
Measure of the U.S. money stock that consists of M1, certain overnight repurchase agreements and certain overnight Eurodollars, savings deposits (including money market deposit accounts), time deposits in amounts of less that $100,000 and balances in money market mutual funds (other than those restricted to institutional investors).

M3
Measure of the U.S. money stock that consists of M2, time deposits of $100,000 or more at all depository institutions, term repurchase agreements in amounts of $100,000 or more, certain term Eurodollars and balances in money market mutual funds restricted to institutional investor.

Suspect it reflects an aggregate re-allocation of assets from the more liquid savings type accounts into less liquid real estate, metals and equities.

Most of the time this means the 'money' moves from one account, to another account and ought to still be included in the measures somewhere.

Repayment of bank loans takes money out of circulation for example. The loan was created out of thin air, and the repayment returns to thin air. - ain't fractional reserve banking great?

Problem with the loan-repayment explanation is that aggregate debt is rising, not falling.

Probably also due to a shift from some dollar denominated savings accounts into foreign currencies.

Possibly. The Japanese have been printing Yen and buying up dollars with the printed Yen. So where do the bought dollars go? If they're invested, they're back in the money supply. But if they're sitting in a Japanese Central Bank, I would think that would be reported to the Fed and those dollars would be counted.

Even if the dollars were spent to buy gold, the 'spending' puts them back in circulation.

'tis a puzzlement.

M1 consists of debt.
M2 consists of debt plus more debt.
M3 consists of debt plus more debt plus more debt.

The basic unit of account is a debt. Your assets are debt. Your liabilities are debts for debt. When individuals and institutions lose their ability to pay their debts then it starts a chain reaction and cascading debt defaults occur. The government tries to fix the problem by borrowing debt from the the central bank, renaming that debt money, and spending it. Sometimes the money can't be spent faster than the defaults. So the amount of money seems to decrease. What is really happening is that debts are going bad and folks are becoming insolvent. Insolvency leads to repossessions and foreclosures. The debtors get to move back in with mom and dad and the bank gets the house and car.

In the old days debts had to be repaid in gold and silver coin, because this is how the U.S. Constitution, in Article 1, Section 10, Clause 1 said it has to be.

Later, when it was ok to ignore the Constitution, it was sufficient to repay a debt with a piece of paper that promised gold or silver coins when redeemed, because that is how the Legal Tender Laws of Febuary 25, 1862 said it would then be. People didn't bother to redeem the pieces of paper and slowly forgot why the founders thought it was important to settle debts in gold and silver coin. Since paper could proliferate and contract violently under these conditions, booms and busts happened and were blamed for hard times.

Later yet, it was sufficient to repay a debt with a piece of paper that promises nothing, since the Federal Reserve and Congress decided that is how it will be. The justification for the federal reserve was to smooth the booms and busts of the period prior. Never mentioned was that the booms and busts happened after the Legal Tender laws were passed. So the federal reserve was a false solution to a problem that began with the legal tender laws. But sssh don't tell anyone.

It is this last kind of debt that is the essence of our unit of monetary account. It is M1. Cash; dollar bills or numbers on the statement from your bank, are debt some individual borrowed or your government borrowed in your name, that circulates as money. The coins are mere tokens. Pennies are not copper, I don't know what nickels are made of but probably not nickel, dimes and quarters and half-dollars, and dollars are not made of silver. Tokens, all of them. I think of this kind of money the way I think of negative numbers, it has a negative quality, anti-wealth, because someone somewhere owes money is the reason you have it.

Real coins are in coin shops with premiums for rarity and good condition. I think of real coins as I think of a positive number, not debt, not negative. They are wealth. When so worn that no one would think it cool to have any individual silver coin, they are sold for their junk value of silver in bags. Example a $1000.00 face value bag of quarters or dimes containing about 715 Oz of silver costs !4,276.00 FRN--at today's prices. Proper paper money is also in the coin shops. They were like warehouse receipts for gold and silver coins and were honored at one time. They did not have the negative debt quality that modern money has though it was not quite as positive as holding the gold coin, it still required trust and confidence. Now the old silver and gold certificates only have historical interest to collectors and no one is there to honor them in a literal way.

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