How does that work???

Quote:

2008-10-22 1.231
2008-11-05 1.193
2008-11-19 1.002
2008-12-03 1.028
2008-12-17 0.954

http://research.stlouisfed.org/fred2/series/MULT

Sounds deflationary to me

velocity is now at absolute zero where all movement stops - f'ing banks are sitting on it - they are too scared to lend and borrowers are too scared to borrow.

The way I see it the loans are actually being paid off at a faster rate (defaults are also occuring) than new money via new loans are underwritten.

The FED/Treasury literally have the physical printing presses running benjamins as fast as possible too... this is some scary ****.

Karl, This would be good subject material for a ticker.

its actually below 1, to demonstrate my ignorance. a dollar lended yields 95.4 cent total return. sort of a reflection of the negative rate on 13 week treasuries.

Storm I am as ignorant as you on this but if that is what the number means, and we have political powers that will try to spend their way out of this mess we are really going to suffer. Alot.

Doesn't a sub 1.0 reading on this indicate that the money supply actually DECREASES for every dollar they add to the system? I can't grok that.

Deflation is obvious but needs to be nipped in the bud ASAP.

Oil signaling a turnaround or a BMR?

Not just deflationary but HYPER-deflationary I would think.

I read this as any further addition to M1 deflates the existing money supply. How can M1 continue to go up if this is in fact true?

All of a sudden the only way to increase M1 is to take money OUT?

alice in wonderland **** here

Mult = M1 / H

where M1 = currency in circulation + checking deposits + other deposits that work like checking deposits
and
H = monetary base.

This is just the result of the Fed stuffing its balance sheet with toxic crap, errr assets. As you can see,

Jasonkolb wrote..

How does that work???

Very simple, the fed pumps as much treasuries (and substitutes) as it can, into the global financial system without crashing the dollar and creating hyperinflation. It is quite ingenious , if not outright genial.

It is as simple as that. This is how globalodollars are born (Fed is now well beyond the point of small regional games like petrodollars and eurodollars).

Isn't it obvious?

This is one time I wish I was stupid and ignorant.

The formula, very roughly speaking, for a Fiat Currency, Fractional Reserve Monetary System is:

Ms=Mor^(N)

Ms = Money Supply
Mor = Prior Money Supply (This is NOT M0, M ZERO)
N (Vm) = Velocity of money.

Here the FOMC does us the favour of N always being the sum of (1+[Velocity of money per unit of time T]).

This equation cannot be changed. It is the foundation of a monetary system. FOMC policy has, up until this year, been to take actions that modify (N). Now they are modifying Mo and Ms, as BB has lost control of (N).

N>=1, money supply grows or stagnates, velocity increases or maintains money supply.
N<1, money supply shrinks.

*******
Mult = M1 / H (Ms)

M1 = currency in circulation + checking deposits + other deposits that work like checking deposits
H (Ms) = monetary base.
*******

BB is stuffing the money supply, causing the Multiplier and the value of N to plummet. This is the inescapable mathematical consequence of pumping up Mo. N (Vm or Mult) must drop to compensate.

Moniteyes wrote..

velocity is now at absolute zero where all movement stops

Vm or (N)<1 is where velocity causes the system to crash/reset. It accelerates the trend line of N or (Vm) to -0-. Iceland. 72 hours. Maybe because we are the Reserve Currency the time factor T will be lengthier, but that is all that will change.

{I miss NoThing. Bring her/him back!}

This is where we begin to***** into a singularity. Nothing we do can fix the mathematical reality that we are raising the existing money supply to an exponent less than one, which will cause money supply to contract.

We.Are.Screwed.

thx Lera.... nice post. guess i'm not going back to sleep tonight.

Ok, I did a little exercise which helped me get it a little more. The M1 figure to correspond with this multiplier isn't out yet, but I was able to figure it out from the monetary base.

What essentially happened is that for the first time ever the monetary base exceeded M1.

Jasonkolb wrote..

What essentially happened is that for the first time ever the monetary base exceeded M1.

You can say that, but I believe it's more than that, basically the speed of monetary collapse of derivatives is higher than the speed of their replacing with treasuries (and equivalents). The interest paid by the Fed on reserves, doesn't help either, but this may be by design. The injection of liquidity is so massive I believe the M1 <1 is due to the lag effect.

What we have here is the picture of the financial turkey force fed with treasuries by B&H, The poor animal is chocking, its gizzards exploding and it takes time for the bowels to start moving all the grains to the exit.

I wonder when is Thanksgiving in Hank's calendar...

http://research.stlouisfed.org/fred2/dat....

Volcker bailed as MULT->3.000
Greenspan bailed as MULT->1.700
Housing Bubble Peaked as MULT->1.700
Bernanke Appointed as MULT->1.666
Inflections Points of 1.666 and 1.600?
New Appointee + 9months = breakthrough resistance level?

As MULT approached 1.700, Greenspan decided to step down.
August 11, 1987 – January 31, 2006

Volcker got MULT as high as he could, the highpoint on the dataset of 3.131.
Then he decided to bolt as it approaches 3.000

Paul A. Volcker (August 6, 1979 – August 11, 1987)
1987-01-14 3.131 ** Highpoint on dataset back to 1984
1987-01-28 3.102
1987-02-11 3.095
1987-02-25 3.104
1987-03-11 3.110
1987-03-25 3.115
1987-04-08 3.113
1987-04-22 3.103
1987-05-06 3.107
1987-05-20 3.084
1987-06-03 3.105
1987-06-17 3.081
1987-07-01 3.094
1987-07-15 3.079
1987-07-29 3.078

Greenspan Appointed
August 11, 1987
1987-08-12 3.061
1987-08-26 3.064
1987-09-09 3.056
1987-09-23 3.055
1987-10-07 3.055
1987-10-21 3.043
1987-11-04 3.067
1987-11-18 3.041
1987-12-02 3.028
1987-12-16 3.003
1987-12-30 3.024
1988-01-13 2.996
1988-01-27 3.007
1988-02-10 3.023
1988-02-24 3.014
1988-03-09 3.009
1988-03-23 3.019
1988-04-06 3.001
1988-04-20 2.975
1988-05-04 2.999
1988-05-18 2.998
1988-06-01 3.008
1988-06-15 2.989
1988-06-29 3.005 ** Last datapoint > 3.000
1988-07-13 2.981
1988-07-27 2.990
1988-08-10 2.992


2004-12-22 1.743
2005-01-05 1.765
2005-01-19 1.708
2005-02-02 1.702
2005-02-16 1.712
2005-03-02 1.719
2005-03-16 1.715
2005-03-30 1.715
2005-04-13 1.700
2005-04-27 1.690
2005-05-11 1.700

June 2, 2005
Word leaks that Greenspan will step down
2005-05-25 1.693 ** Housing Bubble Peaks +/- 4 weeks
2005-06-08 1.705
2005-06-22 1.716
2005-07-06 1.718
2005-07-20 1.684

Aug 4, 2005
Bernanke First Mention
2005-08-03 1.688
2005-08-17 1.695
2005-08-31 1.702 ** Last datapoint > 1.700
2005-09-14 1.678
2005-09-28 1.686

October 24
Bernanke Nominated
2005-10-12 1.699
2005-10-26 1.677 ** Inflection Point?
2005-11-09 1.687

November 1, 2005
Bernanke Confirmed
2005-11-23 1.685
2005-12-07 1.685
2005-12-21 1.684
2006-01-04 1.685

January 31, 2006
Greenspan Steps Down
Bernanke Appointed
2006-01-18 1.662
2006-02-01 1.659
2006-02-15 1.655
2006-03-01 1.662
2006-03-15 1.648
2006-03-29 1.664
2006-04-12 1.669
2006-04-26 1.652
2006-05-10 1.641
2006-05-24 1.651
2006-06-07 1.649
2006-06-21 1.637
2006-07-05 1.658
2006-07-19 1.628
2006-08-02 1.638
2006-08-16 1.630

2008-09-10 1.605 ** Inflection Point?
2008-09-24 1.520
2008-10-08 1.553
2008-10-22 1.231
2008-11-05 1.193
2008-11-19 1.002
2008-12-03 1.028
2008-12-17 0.954

Greenspan is no dummy. Clearly he can read a chart and saw the long term trend and wanted nothing to do with the event horizon.

Pull up the data and watch as it declines.

Thanks for the info Leraconteur. Is this part of the reason you are leaving the country? You expect the event horizon, A.K.A. "The Wall" hit in this country shortly?

lc probably can tell you when, he did the math

"Thanks for the info Leraconteur. Is this part of the reason you are leaving the country? You expect the event horizon, A.K.A. "The Wall" hit in this country shortly?"

Yeah, but as Gen has written this blast zone will be Galactic in scope. There will be no escape.

I chose South Korea because:
1) Culture of hard work
2) Homogeneous
3) They save
4) Work/Study 12 hours per day, except for us lazy foreigners
5) Won, like the Yen, MIGHT strengthen as the dollar tanks.
6) Emphasis on learning English, more so in tough economic times.

I figure I may as well travel and 'semi-retire' now, enjoy it while I can.

Simple Linear Interpolation:
09/10/08 1.61
09/24/08 1.52
10/08/08 1.55
10/22/08 1.23
11/05/08 1.19
11/19/08 1
12/03/08 1.03
12/17/08 0.95
12/31/08 0.88
01/14/09 0.81
01/28/09 0.74
02/11/09 0.67
02/25/09 0.6
03/11/09 0.53
03/25/09 0.46
04/08/09 0.39
04/22/09 0.32
05/06/09 0.25
05/20/09 0.18
06/03/09 0.11
06/17/09 0.04
07/01/09 -0.03
07/15/09 -0.1
07/29/09 -0.17
08/12/09 -0.24

August. You have until August, 2009. Double it you have until April, 2010.

Sure hope I am wrong.

7) Kimchee is yummy.

8) bul bo gi

This is some heavy ****.. reminds me of January when someone first noticed the H.3 going negative..

Godz it just doesn't stop.


N/Twilight Zone, again

Okay, so we've heard this is very deflationary and we've also heard that this could cause an Iceland-like event, which I believe involved something like a 40% price rise (inflation) in consumer goods - or at least critical ones like food - in about 48 hours and a currency depreciation such that forex services stopped dealing in Icelandic currency.

Could someone state and explain what the bottom line is here? From what all of you have said, it sounds like you're saying this is deflationary up until the point that MULT = 0, when it becomes inflationary. What is the consensus on the bottom line here?

A couple of comments on related issues:

I disagree with a previous poster that deflation is inherently really bad. Mild deflation is not necessarily bad: it does not require that the economy be contracting and it is often a byproduct of an ongoing reduction of debt levels in the economy (which is usually a good thing).

Regarding monetary velocity, a pertinent equation is:

Price x Quantity = Money Supply x Monetary Velocity
(P x Q = M x V)

In this case, Price times Quantity is the sum total for all sales of goods and services in the economy. Money Supply is of course how much money is floating around, and Monetary Velocity, as you all well know, is how often it changes hands over the course of a year.

If there's $5000 worth of stuff sold in our hypothetical economy every year (say 100 widgets, thingamajigs and whatnots, sold at average of $50 apiece), and there's $1000 worth of money floating around, then the money changes hands on average five times per year.

As an example, if monetary velocity drops and the money supply stays constant, then either Price or Quantity - or maybe both - must necessarily drop accordingly.

It sounds like you're saying that the multiplier value affects both size of the money supply (which makes sense to me, since the "money supply" is not necessarily the same thing as the amount of actual bills and coins in circulation) and monetary velocity (which I guess could affect money supply via its effects on borrowing and lending). If you could explain more in those terms, it would be helpful to me in understanding this.

Thanks!