Lets look at this paired with another piece of data from the Fed. I have shortened the timeframe to focus on the last 5 years as most of the real action in the charts have happened in the last year and a half.
Chart 1: 5 year Monetary Base
Chart 2: Excess reserves of depository institutions
Notice how similar the charts look? Lets see how the actual increase in the monetary base and the "excess reserves" by the banks match up with the actual data...I think you will see something very interesting.
Lets go back in the time machine all the way back to March of 2008 and the collapse of Bear Stearns. That month showed a slightly increased 3.5 billion dollars onto the monetary base. Depository institutions holdings increased by 1.25 billion dollars that month. Interesting since that is the exact amount that JP Morgan paid to acquire Bear.
Now, fast forward to September of 2008. The dreaded month of Lehman and Merrill Lynch dying. That month the first of the big 'injections' occured--the monetary base raising by 60.3 Billion. Guess What? Bank excess deposits went up a corresponding 58.1 billion. Once again, interesting because of the purchases of Lehman and Merrill for a combined 54 billion and change.
But now, we have to get serious. The Fed must print the money to funnel to its owner banks. The presses must go into high gear. There is a crisis.
Look how these compare--the monetary base and excess reserves...printing cash and giving it to the banks:
Lets go back in the time machine all the way back to March of 2008 and the collapse of Bear Stearns. That month showed a slightly increased 3.5 billion dollars onto the monetary base. Depository institutions holdings increased by 1.25 billion dollars that month. Interesting since that is the exact amount that JP Morgan paid to acquire Bear.
Now, fast forward to September of 2008. The dreaded month of Lehman and Merrill Lynch dying. That month the first of the big 'injections' occured--the monetary base raising by 60.3 Billion. Guess What? Bank excess deposits went up a corresponding 58.1 billion. Once again, interesting because of the purchases of Lehman and Merrill for a combined 54 billion and change.
But now, we have to get serious. The Fed must print the money to funnel to its owner banks. The presses must go into high gear. There is a crisis.
Look how these compare--the monetary base and excess reserves...printing cash and giving it to the banks:
Oct 08--Monetary Base +225.3 billion, excess reserves +207.8 billion
Nov 08--Monetary Base +309.3 billion, excess reserves +291.1 billion
Dec 08--Monetary Base +224.1 billion, excess reserves +208.4 billion
Jan 09--Monetary Base +48.3 billion, excess reserves +30.8 billion
Feb 09--Monetary base -149.9 billion, excess reserves -154.8 billion
Mar 09--Monetary Base +84.7 billion, excess reserves +81.1 billion
Apr 09--Monetary Base +105.9 billion, excess reserves +99.7 billion
May 09--Monetary Base +22.2 billion, excess reserves +19.7 billion
Jun 09--Monetary Base -90.8 billion, excess reserves -92.7 billion
July 09--Monetary Base -11.4 billion, excess reserve -18.4 billion
Aug 09--Monetary Base +33.1 billion, excess reserves +32.9 billion
Sept 09--Monetary Base +94.9 billion, excess reserves +94.2 billion
Interesting, huh? Seems as though over 95 cents of every dollar that is added to the monetary base ends up in the banks vault at the Fed. THAT is why inflation is not rampant right now. The money is "in the bank".
What is the net of all of that in the last year? The fed has increased the monetary supply by just under 956 billion dollars. Of that, 858 billion is sitting in the banks vaults at the fed. 89.76 cents of every dollar.
What is next? why another credit squeeze of course. We have build up the cash in the vault--now we need to create a crisis so that cash can be put to work buying real assets--homes, factories, etc....for pennies on the dollar.
What is the net of all of that in the last year? The fed has increased the monetary supply by just under 956 billion dollars. Of that, 858 billion is sitting in the banks vaults at the fed. 89.76 cents of every dollar.
What is next? why another credit squeeze of course. We have build up the cash in the vault--now we need to create a crisis so that cash can be put to work buying real assets--homes, factories, etc....for pennies on the dollar.
