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MASSIVE spike in M1 money supply.


Absolutely MASSIVE spike in M1 money supply. Increase of 35% in 1 month.

I understand that QE is not inflationary, because it is an asset swap.

However, M1 includes funds that are readily accessible for spending.

So what happens now ??? Buy STAWKS ??? Buy G*ld???

I'm wondering about this Lost demand I have been reading about that counter balances current demand needs in regards to M1..

Also, More concerning is HABIT CHANGE.. People get scared and change their purchase habits and ONLY SAVE because they are so scared to go out and spend.. This metric can create a whole group of millions of people that save and stall the economy for years


At: https://mailchi.mp/8f126f390556/which-economic-thoughtcomes-out-best-from-the-last-decade-1336071?e=260ed9002a

This economists emphasises 'broad money'

"The fiscal and monetary sprees have been so huge and permissive that broad money growth rates have risen to extraordinary levels. As I have pointed out above, and about which I have in fact been hinting for some weeks, the USA now has the highest annual growth rate of the quantity of money in its peacetime history. So – unlike late 2008 and early 2009 (and indeed for a few years thereafter) – I am very worried about a sequel in which annual inflation takes off into the double digits, at least in the USA. "

I'm having trouble reconciling Cullen's information from page 10 of:
Understanding the Modern Monetary System:

"This brings us to the other dominant form of money in our monetary system – outside money. Outside money is money created outside of the private sector. This includes cash notes, coins and bank reserves. Cash and coins are created by the US Treasury while bank reserves are created by the Federal Reserve (reserves can be thought of as deposits held on reserve at the Fed). Although cash & coins are becoming obsolete in some money systems, they remain prevalent forms of money in most economies. This form of money primarily serves for convenience purpose that allows one to draw down a bank account of inside money (via ATM for instance) to make transactions in physical currency. In other words, cash and coins are primarily used by those who have an account in inside money for the means of conveniently transacting business in physical form.

The most important form of outside money is bank reserves or deposits held on reserve at Federal Reserve banks. These deposits are held for two purposes: 1) to settle payments in the interbank market; 2) to meet reserve requirements. Bank reserves are ONLY used by banks and the central bank in the interbank market and do not reside in the non-bank private sector. It is best to think of reserves as deposits held in accounts at the various Fed banks to settle payments within the banking system. For example, if you have a bank account at JP Morgan and you use your bank deposits to purchase a sandwich from someone who banks at Bank of America (who subsequently deposits the funds at B of A) the banks will settle this payment by transferring reserves in the interbank market. This interbank system creates a market where the Federal Reserve can help streamline settlement of payments and ensure stability and liquidity within the payments system.

Central Bank “reserves” sometimes confuse people because they are not a familiar instrument in the non-bank private sector economy. To better understand reserves it can be useful to think of the banking system as having its own banking system. That is, the non-bank private sector uses the payment & deposit system via private banks. But the banks use their own deposit system which we call the reserve system. These reserves help the banks settle payments and process interbank payments across their own payment network.

What’s crucial to understand here is the way that outside money serves primarily to facilitate the existence of inside money. That is, the creation of outside money is almost entirely a facilitating feature to influence or stabilize inside money, the primary form of money in the economy. Through its vast powers the government can serve as an important stabilizing force in a system that is designed primarily around inherently unstable private competitive banking. In understanding inside money and outside money, one must also understand that it is the banks who “rule the monetary roost” so to say. That is, banks issue almost all of the money in circulation today in the form of loans and the government is designed primarily to support this privatized money creation source.

Contrary to popular belief, the government does not issue or “print money” (except in the most literal sense, ie, the US Treasury prints notes to meet demand for use at private banks by bank customers who have accounts in inside money). The government is only the issuer of outside money which is designed to facilitate and support the use of inside money."

See the chart attached BOGMBASE. Is this more than just "facilitating and supporting" inside money? To me, it looks as if the Fed actually is adding assets to the economy (e.g. inside money) and putting on its books "outside money" (e.g. reserves, a yuuuge loan to the private sector), that will never be paid back).


Uploaded files:

April 09, 2020

Elimination of Reserve Requirements

As announced on March 15, 2020, the Board reduced reserve requirement ratios on net transaction accounts to 0 percent, effective March 26, 2020. This action eliminated reserve requirements for all depository institutions. As a result, many of the items related to reserve requirements and featured in tables 1 and 2 of the Board's Statistical Release H.3, "Aggregate Reserves of Depository Institutions and the Monetary Base," are zero beginning with the two weeks ending April 8, 2020.

Board of Governors of the Federal Reserve System (US), Monetary Base; Total [BOGMBASE], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/BOGMBASE, July 1, 2020.

The entire Fed system is designed to facilitate the banking system. That's literally the only reason the Fed exists - to help clear interbank payments. When they expand their balance sheet and create new reserves it is always to help facilitate and support the private sector's balance sheet in some manner.

"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche

In Z.1 report, Monetary Authority(i.e. Fed) is in Domestic Financial Sectors, not in Government Sectors.  All Z.1 tables are here, F109/L109 for Monetary Authority, Financial Account Matrix for  All Sector Level/Flow Balances .  According to this classification, reserves should be called inside money, not outside money and used among Domestic Financial Sectors. In this way, we can better clarify  issues:


1.  Governments do not  print money  nor create reserves . Only Cash and coins are created by the US Treasury(Federal Government). BOGMBASE is calculated from liabilities of L109 Monetary Authority, not from L106 Federal Government 

2.  Inconsistent accounting identities with macro accounting data.

For each sector,
Production Account Balance=Financial Account Balance = Capital Account Balance

For example,  Government Production Account Balance =  T - G.  This PA balance will not be equal to Government Financial Account Balance(Gov Deficits/Surplus)  anymore if  FED is counted in Government sectors.