Chronicles Of Depression 2.0: #103

Fed's Direct Loans to Banks Climb to Record Level (Update2)

May 15 (Bloomberg) -- The Federal Reserve's direct loans of cash to commercial banks climbed to the highest level on record in the past week as money-losing lenders increasingly turn to the central bank for funds.

Funds provided through the so-called discount window for banks rose by $2.8 billion to a daily average of $14.4 billion in the week to May 14, the central bank said today in Washington. Separately, the Fed's loans to Wall Street bond dealers rose by $75 million to $16.6 billion.

And here's the scam at work:

Net Miss

There was one net miss, on May 14, the Fed said. A net miss occurs when the actual reserve level in the banking system diverges from the Fed's projections for a day by $2 billion or more. If the level is outside expectations, the federal funds rate can deviate from target.

The central bank also reported that the M2 measure of money supply rose by $1.1 billion in the week ended May 5. That left M2 growing at an annual rate of 6.7 percent for the past 52 weeks, above the target of 5 percent the Fed once set for maximum growth. The Fed no longer has a formal target.

The Fed reports two measures of the money supply each week. M1 includes all currency held by consumers and companies for spending, money held in checking accounts and travelers checks. M2, the more widely followed, adds savings and private holdings in money market mutual funds.

During the latest reporting week, M1 fell by $7 billion. Over the past 52 weeks, M1 declined 0.1 percent. The Fed no longer publishes figures for M3.

Emphasis added by me.

"The Fed no longer has a formal target." -- in other words, things are so out of whack, they have to get rid all past measures and limits.

"The Fed no longer publishes figures for M3." -- let's not tell the children.

Let me paint you a picture.

A stumbling drunk is trying to cross a multi-lane highway. By sheer dumb luck he has missed getting smashed by any of the hundreds of speeding cars. But he still has lanes to go to get to the other side.

That drunk is our economy.

Prepare for our flattening.