Friday, December 19, 2014

Bank Ride of the Valkyries (Musical Tribute)

The following chart shows the 5-year moving average of bank deposits at all commercial banks divided by GDP.

Click to enlarge.

Hurray! Another parabola! If there's one thing I like to see, it's unsustainable parabolas in the banking system. This one, like all others, is guaranteed to fail at some point.

On the one hand, we're slightly below trend right now. This could be the start of a trend failure.

On the other hand, I am not at all confident about long-term GDP growth from here. The trend could therefore recover.

November 21, 2002
Deflation: Making Sure "It" Doesn't Happen Here

A money-financed tax cut is essentially equivalent to Milton Friedman's famous "helicopter drop" of money.

Perhaps the helicopters should have been deployed more evenly? I sure don't see much that has prevented "it" from happening yet. If flooding the banks with cash is so effective, then why hasn't it worked in Japan or Switzerland?

December 18, 2014
Swiss National Bank will cut interest rate to minus 0.25%

Switzerland is also chary of attracting yet more money into its banking-heavy small country.

Bank Run

A bank run (also known as a run on the bank) occurs in a fractional reserve banking system when a large number of customers withdraw their deposits from a financial institution at the same time and either demand cash or transfer those funds into government bonds, precious metals or stones, or a safer institution because they believe that the financial institution is, or might become, insolvent.

Switzerland is begging you to run! For the love of all that is holy, please stop relentlessly assaulting their banks with your helicopter money!

Source Data:
St. Louis Fed: Custom Chart

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