The M3 money supply in the United States is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history.
The stock of money in the US fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc
The M3 figures – which include broad range of bank accounts and are tracked by British and European monetarists for warning signals about the direction of the US economy a year or so in advance – began shrinking last summer. The pace has since quickened.
via US money supply plunges at 1930s pace as Obama eyes fresh stimulus – Telegraph.
We are in a period of “deflation” right now, because most of the money counted in M3 is imaginary – loans and such that were written by banks and funded from fractional reserve money supply expansion.
Basic summary: When you deposit $100 in the bank, the bank can loan out $99.98 (or therabouts, they keep changing how much they have to keep in “reserve”) to someone else. That person then deposits the $99.98 somewhere, and now there’s $199.98 in circulation. The next bank can then loan out $99.96, and suddenly there’s $299.94 in circulation.
Let’s say the two people downstream both default on their loans: $199.94 vanishes back into the thin air from whence it came, and unless your bank goes belly-up, only your original $100 still remains in your bank account.
Technically, that’s deflation, but it’s not harmful to the economy, beyond the effects of the defaulted loans.
Unfortunately, the bankers and their pets in government don’t want to suffer the effects of their lousy, corrupt banking practices, so they do everything they can to cover up what happened, and to prop up their banks and investments and keep prices high so the face values of their “assets” remains high.
And so, they are going to go about repeating every single idiotic and stupid error that has always resulted in runaway inflation, crashed markets, incredible busts, and devastated nations.
Now’s a great time to invest in durable goods, food, and things you won’t be able to buy with a wheelbarrow full of worthless paper.