M1 is irrelevant.. MZM will be exploding.

Laswyguy please tell me you're joking.

Goldbug alert.

.915 now, and they revised the 12-31 to .944 it was .945, not that .001 differance matters.

Lera : *sigh* do post some postcards here in SK while you're watching this alright? Gracias for this thread....

I did a few calculations of my own since TSHTF moment in September.

Average decline: -0.077
Average decline with the outliers removed (-0.229 and -0.18): -0.040


Average case:
0.838
0.762
0.685
0.608
0.532
0.455
0.378
0.302
0.225
0.148
0.072
-0.005

7/1/2009

Average without outliers:
0.875
0.835
0.795
0.754
0.714
0.674
0.634
0.594
0.554
0.514
0.473
0.433
0.393
0.353
0.313
0.273
0.233
0.192
0.152
0.112
0.072
0.032
-0.008

12/2/2009

And your conclusion is...

Average case we implode by 7/1/2009. Average without the outliers we implode by 12/2/2009.

Frankly, I'm not sure what exactly happens when the M1 multiplier reaches (or even approaches) zero, but I know I won't like it.

And the other pertinent question - does the stock market implode before or after that?

I was very busy this afternoon, just pulled this up.
I immediately yelled out "Oh ****!" and put my hand to my forehead.

**** **** ****ity ****!!!

12-17 revised
.954 to .951

12-31 revised
.945 to .944

2008-11-19 1.010
2008-12-03 1.025
2008-12-17 0.951
2008-12-31 0.944
2009-01-14 0.915

This is what a monetary reset looks like. If you created a data set to model a hypothetical collapse, what you would get is our MZM, MULT, Vm, N, figures from September to present.

Sorry folks, no way to spin this one as good news.

Doing a simple linear progression, we get 915/29 or 31.55 X 2 weeks.
63.1 weeks. That's April 3, 2010.

Maybe BHO will be able to reverse this with policy changes. Maybe the lump in the snake will pass through and enter the economy. Maybe we will spend trillions, MULT will drop to 0.350 or such and just hover their for years, then slowly rise with time. Maybe, and I hope so.

Unfortunately the date points in another direction.

Someone PM'd this to KD, yes?

I have it.

They clearly don't listen, so it is what it is.

I have the sinking feeling that at some point 'linear' progression is not the appropriate model.

You are correct Alsace. All exponential functions look linear at the beginning.....

Nice so if this trend holds we are looking at before Q1 2010

Here's hoping we don't

Genesis wrote..

All exponential functions look linear at the beginning.....

They look linear near the end too... a straight vertical line

bernanke & team publishes this fuc*ing data so why isn't anything being done about it? don't they have the tools/influence to reverse course? to piggyback pika, where does the market end up in a reset? maybe i don't want to know.

i believe this data was first published in 1980 or 1984. it'd be interesting to know what the figures looked like in GD1.

FWIW, in 1929, M1/BASE was nearly 4... http://fraser.stlouisfed.org/docs/meltze....

Leraconteur wrote..

This is what a monetary reset looks like.

This is the second or third time you have said this. Can you please explain for us stupid people?

Isn't this MULT print just a reflection of the massive high-powered money reserves parked at the Fed that aren't going anywhere? If the MULT of that money is 0, doesn't it drag the overall average down? The reserves at the Fed are HP money right?

I agree that MULT @ 0 = screeching halt to transactions and instant deflationary collapse, but couldn't the above simple explanation be best?

Noob here, just wondering. Dont' hurt me. :)

It is a REFLECTION of (but not actual) velocity on that high-powered money, yes.

The problme is that it is STRONGLY implying that velocity is coming way down, or at least NOT being increased (which is what The Fed is TRYING to do) and that's NOT good.

Oh, I see. What the Fed wanted MULT to do was spike UP but instead it spiked DOWN as everyone just parked the money in HP reserves and sat on it.

Gen, in the past you have implied that (a) MULT < 0 will happen at the same time as (b) dGDP/dMZM < 0. But they don't have to happen at the same time, correct?

I have written and erased 3 guesses as to what will happen at that point. I have no idea. Do you? I'd imagine it involves the terms "bond market dislocation" and "sovereign default".

No, when VELOCITY goes below 1 you're in deep ****.

MULT is not V(x). It does, however, indicate that all this "liquidity" in the form of new bank reserves is not going anywhere - and thus, its also not doing anything productive.

In other words Bernanke's thesis that he can just print this **** up, shower the system with it, and it will get into the economy has now been proved false.

I know that GDP/MZM is monetary velocity and MULT is just how much money is created for each additional dollar of money injected into the system. But HP money that is sitting in the Fed's vaults and not being lent out has both a MULT of 0 (not being lent out) and velocity of 0 (not contributing to GDP). Right?

The steepness of the drop in MULT pretty much proves that absolutely none of the injected TARP dollars are being lent, I agree.

Grf, correct.

One of the problems that hasn't been mentioned yet is the inverse of this figure and the general trend in M1 mult over the same time as dGDP/dMZM has been decreasing. The discontinuity in the last stages of the graph glosses over than M1mult had been trending downward for a long time.

As this is a combination of exponential functions, reserves and MZM growth have compounding needs. At a level rate of multiplier, ever more monetary growth will be necessary just to stay still, rather than grow supply. This is because each monetary addition shrinks the aggregate base at any multiplier below 1. Expect all interventions to grow just as the Federal Debt has grown, at a reasonably level rate. The scalar amounts in question will balloon into the exosphere. $1T was a few years ago, $2T now, $4T in a few years.

A negative rate of real interest against level pricing is a sure sign of money vanishing from the system. Rather than let interest rates normalize, the Fed is attempting to drive monetary growth from the supply side with ever-decreasing rates of interest. Already we hear calls for negative rates of 6%.

The issue that is the 6000lb gorilla is that most of the GDP growth in the last 10 years was synthetic. It was nominal and not real GDP. Credit grew because of derivatives products, not actual production. The elimination of these markets for synthetic bonds (ponzi) makes credit contraction mathematically inevitable.

Housing and related mortgages on real things were only the very tip of a gigantic iceberg. Once the real economy ran out of real things to backstop debtmoney, the situation morphed into a gigantic speculative ponzi in the truest sense of the word. We had ratings, exchanges, and all of the trappings and appurtenances of trade in real things, but the instruments which were created with leverage (credit growth) had only the slimmest nexus to the real world. Credit growth has been driven by trade in ponzi instruments like CDOs created out of CDS payment streams.

Without a new bubble to drive credit creation, everything the Fed does to further depress the rate structure will lead to nothing more than ever-faster monetary destruction. Money sitting still at a negative rate of interest has less than 0 velocity. It can't be long before they are forced to abandon lending and must hand out checks and create inflation expectations sufficient to cause people to start spending.