7 ms·

Interesting. Where did these $472B go? My understanding is that this didn't go into another bank, that $472B is a net across all banks. Did people start investi

Interesting. Where did these $472B go? My understanding is that this didn't go into another bank, that $472B is a net across all banks. Did people start investing more? Did this money go into the economy?

snapcaster 3y ago
I think money market accounts and similar are the likely recipients
- bombcar 3y ago
  This is it, mainly. You'll be able to see it here https://fred.stlouisfed.org/series/MMMFFAQ027S https://fred.stlouisfed.org/series/MMMFFAQ027S eventually.
deleted 3y ago
[deleted]
dragontamer 3y ago
It disappeared. Fed policy for the last year has been to disappear money, which should eventually fix our inflation problem. Cash is dwindling for the first time in a generation. The economy will act differently than most of us have seen in our lifetimes. ------- M2, a measurement of how much money is in our economy, has been shrinking for months. Then again, M2 expanded too much during the COVID-19 era policies (we overreacted to the problem. But I don't blame policy makers for taking bold action). So this is a somewhat natural backlash that the Fed needs to manage. We are, and have been, undoing QE and raising interest rates simultaneously. This causes lending to be more expensive and savings to be better. Alas, we all have debts to pay (lots and lots of individual debt, record high mortgage rates and car loan rates). We all have a bit less money as a people compared to last year. So in practice, we are seeing personal savings dwindle and credit card debt (and other debt) balloon due to these interest rates. --------- EDIT: Downvotes? Lemme explain further. Since the peak in M2 of April 2022 at $22 Trillion, we're down to $20.9 Trillion, or roughly a loss of $1.1 Trillion in M2 (a measurement of how much money is in existence). The easiest place for cash to disappear is from liquid-savings accounts. Its very indirect: Fed raises interest rates, indirectly raising mortgages and car loan costs, raising what people are paying each money, eventually lowering savings accounts. But the "buck stops" somewhere, and its probably going to be in a liquid savings account.
- bubbleRefuge 3y ago
  No. Fed policy has been to increase the price of money or interest rates in hopes of reducing demand in the economy to combat inflation because it makes borrowing more expensive to borrowers.
  - dragontamer 3y ago
    Which does... What to M2? It causes M2 to drop, and M2 includes savings account balances and MMFs (so it cannot be explained with "Oh, people just moved money to MMFs", because Savings+MMFs is dropping in general)
    - s1artibartfast 3y ago
      M2 does not include institutional money market funds. This excludes pension fund, mutual fund company, bank, insurance company, or any other large institution.
      - dragontamer 3y ago
        You're right in that I've overgeneralized my statement earlier. But I argue my point still stands. https://fred.stlouisfed.org/series/WRMFNS https://fred.stlouisfed.org/series/WRMFNS Retail component of money market funds remains part of M2. Meaning that if depositors switched their money to VMFXX (or other retail money market funds), then it'd still be part of M2.
have_faith 3y ago
Money (deposits) are created at the point that loans are made. Money is destroyed when these loans are repaid. The money supply (specifically M2, that includes deposits) can shrink if less loans are created compared to loans being paid off. Raising interest rates has this explicit effect. There is a lag for this affect to be noticed in the system.
- s1artibartfast 3y ago
  My understanding is the exact opposite. Total deposits is the money individuals placed in banks, (e.g. cash in a checking account). If a bank gives you a mortgage, it does create money due to the fractional reserve, but it doesnt change the underlying deposits (The deposits are the reserve) The titular loss is simply people moving cash savings to money markets.
  - have_faith 3y ago
    This is actually a very common misunderstanding. Fractional reserve banking, as commonly learned, doesn't apply to most countries. The amount of money in the system made up of currency deposited into a bank is less than 10% of overall money in the system (I think it was 7% in the UK last I checked). The rest is money (deposits) created from thin air at the moment that a loan is granted. The Bank of England website actually has some very good articles on these subjects. Loans literally create money. Paying off a loan destroys it, minus the interest paid to the lender, that stays in the system. Banks do have a minimum reserve amount that they have to hold with the central bank, in the US and the UK this reserve percentage is currently 0 (zero). I have a few downvotes it seems. I'd be very interested in where the gaps are in my knowledge as it's something I've been learning a lot about recently.
    - s1artibartfast 3y ago
      >Money (deposits) are created at the point that loans are made >The rest is money (deposits) created from thin air at the moment that a loan is granted. You are conflaiting deposits and money in cirulation but they are not interchangable. Deposits refer specifically to cash held with a bank, not debt. As such, deposits do not change when loans are granted or repayed. >Money is destroyed when these loans are repaid. Similarly, Money is not destroyed when loans are repaid. Loans are repaid with real money, which remains in circulation.
bubbleRefuge 3y ago
treasury securities paying 5%. you should take advantage. its free money. risk free.

snapcaster 3y ago

I think money market accounts and similar are the likely recipients

bombcar 3y ago
This is it, mainly. You'll be able to see it here https://fred.stlouisfed.org/series/MMMFFAQ027S https://fred.stlouisfed.org/series/MMMFFAQ027S eventually.

deleted 3y ago

[deleted]

dragontamer 3y ago

It disappeared. Fed policy for the last year has been to disappear money, which should eventually fix our inflation problem. Cash is dwindling for the first time in a generation. The economy will act differently than most of us have seen in our lifetimes. ------- M2, a measurement of how much money is in our economy, has been shrinking for months. Then again, M2 expanded too much during the COVID-19 era policies (we overreacted to the problem. But I don't blame policy makers for taking bold action). So this is a somewhat natural backlash that the Fed needs to manage. We are, and have been, undoing QE and raising interest rates simultaneously. This causes lending to be more expensive and savings to be better. Alas, we all have debts to pay (lots and lots of individual debt, record high mortgage rates and car loan rates). We all have a bit less money as a people compared to last year. So in practice, we are seeing personal savings dwindle and credit card debt (and other debt) balloon due to these interest rates. --------- EDIT: Downvotes? Lemme explain further. Since the peak in M2 of April 2022 at $22 Trillion, we're down to $20.9 Trillion, or roughly a loss of $1.1 Trillion in M2 (a measurement of how much money is in existence). The easiest place for cash to disappear is from liquid-savings accounts. Its very indirect: Fed raises interest rates, indirectly raising mortgages and car loan costs, raising what people are paying each money, eventually lowering savings accounts. But the "buck stops" somewhere, and its probably going to be in a liquid savings account.

bubbleRefuge 3y ago
No. Fed policy has been to increase the price of money or interest rates in hopes of reducing demand in the economy to combat inflation because it makes borrowing more expensive to borrowers.
- dragontamer 3y ago
  Which does... What to M2? It causes M2 to drop, and M2 includes savings account balances and MMFs (so it cannot be explained with "Oh, people just moved money to MMFs", because Savings+MMFs is dropping in general)
  - s1artibartfast 3y ago
    M2 does not include institutional money market funds. This excludes pension fund, mutual fund company, bank, insurance company, or any other large institution.
    - dragontamer 3y ago
      You're right in that I've overgeneralized my statement earlier. But I argue my point still stands. https://fred.stlouisfed.org/series/WRMFNS https://fred.stlouisfed.org/series/WRMFNS Retail component of money market funds remains part of M2. Meaning that if depositors switched their money to VMFXX (or other retail money market funds), then it'd still be part of M2.

have_faith 3y ago

Money (deposits) are created at the point that loans are made. Money is destroyed when these loans are repaid. The money supply (specifically M2, that includes deposits) can shrink if less loans are created compared to loans being paid off. Raising interest rates has this explicit effect. There is a lag for this affect to be noticed in the system.

s1artibartfast 3y ago
My understanding is the exact opposite. Total deposits is the money individuals placed in banks, (e.g. cash in a checking account). If a bank gives you a mortgage, it does create money due to the fractional reserve, but it doesnt change the underlying deposits (The deposits are the reserve) The titular loss is simply people moving cash savings to money markets.
- have_faith 3y ago
  This is actually a very common misunderstanding. Fractional reserve banking, as commonly learned, doesn't apply to most countries. The amount of money in the system made up of currency deposited into a bank is less than 10% of overall money in the system (I think it was 7% in the UK last I checked). The rest is money (deposits) created from thin air at the moment that a loan is granted. The Bank of England website actually has some very good articles on these subjects. Loans literally create money. Paying off a loan destroys it, minus the interest paid to the lender, that stays in the system. Banks do have a minimum reserve amount that they have to hold with the central bank, in the US and the UK this reserve percentage is currently 0 (zero). I have a few downvotes it seems. I'd be very interested in where the gaps are in my knowledge as it's something I've been learning a lot about recently.
  - s1artibartfast 3y ago
    >Money (deposits) are created at the point that loans are made >The rest is money (deposits) created from thin air at the moment that a loan is granted. You are conflaiting deposits and money in cirulation but they are not interchangable. Deposits refer specifically to cash held with a bank, not debt. As such, deposits do not change when loans are granted or repayed. >Money is destroyed when these loans are repaid. Similarly, Money is not destroyed when loans are repaid. Loans are repaid with real money, which remains in circulation.

bubbleRefuge 3y ago

treasury securities paying 5%. you should take advantage. its free money. risk free.