Adjusted Monetary Base annualized growth hits 97.5%

[Chase]

 

[MrNick]

Never mind.

 

[icon124]

before anyone gets carried away...this DOESN'T cause inflation...this base must be brought into existence under the money supply before inflation occurs.

 

[TulsaRevolution]

before anyone gets carried away...this DOESN'T cause inflation...this base must be brought into existence under the money supply before inflation occurs.

Which is why we need a catalyst for a new wave of malinvestment. This is where Obama steps in.

 

[Michigan11]

Reminds me of looking at ronpaulgraphs during our money bombs, ha!

 

[jon_perez]

before anyone gets carried away...this DOESN'T cause inflation...this base must be brought into existence under the money supply before inflation occurs.

Err... the base IS money in existence. Perhaps you meant lent out of the banks... ?

 

[ImpeachKingGeorgeII]

before anyone gets carried away...this DOESN'T cause inflation...this base must be brought into existence under the money supply before inflation occurs.

Err... the base IS money in existence. Perhaps you meant lent out of the banks... ?

And, how does anyone know that this newly created money isn't already in circulation?

 

[icon124]

Err... the base IS money in existence. Perhaps you meant lent out of the banks... ?

No the base has to turn into the money supply before it is considered for inflation. Monetary base and money supply are two different things. The Fed is contributing to the monetary base (a.k.a. bank reserves). Yes, once banks lend it will be counted under the money supply...the banks can also invest as well.

And, how does anyone know that this newly created money isn't already in circulation?

Because you would see an increase in the money supply and not just the monetary base. Take a look at M1 and M2 data...that will let you know if it is being lent.

 

[theoakman]

before anyone gets carried away...this DOESN'T cause inflation...this base must be brought into existence under the money supply before inflation occurs.

do you think that it's just going to sit there for fun?

 

[icon124]

do you think that it's just going to sit there for fun?

no, but I do think..and know...people confuse the two ALL the time.

 

[theoakman]

regardless of when it hits the market, it's going to hit the market, and it's going to suck big time.

 

[jon_perez]

No the base has to turn into the money supply before it is considered for inflation. Monetary base and money supply are two different things. The Fed is contributing to the monetary base (a.k.a. bank reserves). Yes, once banks lend it will be counted under the money supply...the banks can also invest as well

Ah yes, monetary base and M1 are two quite different things. Very helpful clarification. You could have a gigantic monetary base and if banks refuse to lend out, M1 would still not budge.

 

[theoakman]

Ah yes, monetary base and M1 are two quite different things. Very helpful clarification. You could have a gigantic monetary base and if banks refuse to lend out, M1 would still not budge.

the government strong armed the banks to fork over 10% ownership. What will stop them from making them fork over 51% and loan the money out themselves?

 

[smokey]

.​

Credit is created through solvency, not liquidity.

The monetary base, which is the reserves in the system, allows the capacity to create new credit.

The ability to create new credit is determined by a bank's capital to risk-weighted asset ratio as determined by the Fed's version of the Basel I Accord.

Growing defaults in the system destroy bank capital by deflating asset value. Asset liquidation and deleveraging further destroying bank capital thereby decreasing the banking system's ability to create new credit.

The Fed has the ability to increase liquidity in the system by purchasing treasuries in the open market, but its ability to replace capital is limited by its capacity to take on risk. The more risky assets it has on its books, the less capacity the Fed has to remove money from the system when it needs to.

The government can sell treasuries to recapitalize banks and has, but after getting burned by AIG and TARP, Congress has been very hesitant lately to do so.

Therefore, although banks have plenty of reserves to back new credit creation, their ability to create credit is limited by their failing capital/risk ratio which sustains aversion to risk.

That is why the reserves are just sitting there....

All dressed up with no place to go.

.​

 

[Republicae]

no, but I do think..and know...people confuse the two ALL the time.

The MONEY BASE is composed of currency and coins outside the banking system plus liabilities to the deposit money banks. That is money that is in circulation and it is inflationary since it consist of only the most liquid forms of money. Reserves and monetary base figures incorporate adjustments for discontinuities, or "breaks," associated with regulatory changes in reserve requirements. Seasonally adjusted, break-adjusted total reserves equal seasonally adjusted, break-adjusted required reserves plus unadjusted excess reserves.

Seasonally adjusted, break-adjusted nonborrowed reserves equal seasonally adjusted, break-adjusted total reserves less unadjusted total borrowings from the Federal Reserve. Excess reserves NSA equals unadjusted total reserves less unadjusted required reserves.

The seasonally adjusted, break-adjusted monetary base consists of seasonally adjusted, break-adjusted total reserves plus the seasonally adjusted currency component of the money stock plus vault cash exceeds their required reserves, the seasonally adjusted, break-adjusted difference between current vault cash and the amount applied to satisfy current reserve requirements.

This race between the deleveraging and the injection of vast amounts of "money" will come to an end. When this delveraging tapers off there will be a lull that will lead people to think this is finally all over, then the highly inflationary policies of recent months will present itself in the form of rapidly rising prices to the point that we will all wish for deflation again.