19 days ago • Posted by Charles-Henry Monchau
"Houston, we have a problem!" - The velocity of M2 money has plunged to an all time low
So what's going on? As shown in the latest US banks quarterly results reports, bank deposits continue surging but loan growth is flat. Indeed, the aggregate loan growth for the 4 largest banks has been ZERO over the last 12 years! That means that there are now far more deposits than there are loans in the US banking system. In other words, the conventional process of deposit creation via loans is broken. The Fed has forced banks to accumulate massive deposits but loan demand is nowhere near enough to offset this. Consequence, money creation is incidentally not ending up not in the economy but in capital markets. The end result: BROAD deflation offset and ASSET PRICE hyperinflation.
(The velocity of M2 is calculated as the ratio of quarterly nominal GDP to the quarterly average of M2 money stock. The velocity of money is the frequency at which one unit of currency is used to purchase domestically- produced goods and services within a given time period).