I figured as much.
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 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.
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.