Bank Reserve Balances Are Terrible

In two weeks of time, the bank reserves continue its swan dive. The whole banking system is now held and patched together by Federal Reserve. Without all the bailouts for the bankers, many banks should have gone under.

Here is the data for the current bank reserve (click to go to Federal Reserve data), at negative 100 billion dollars. Since last November which had been holding at above positive 40 billion dollars, the US bank reserves have gone down by 140 billion dollars, or 350%. The rate of deterioration is very fast also, at about 31 billion every month. What’s holding everything together is the increase in the term auction credit. Instead of having a contracting monetary base, everything is temporarily held together at about constant monetary base (but not M3 which is exploding at about 15 to 20% annual rate).

Again, one more emphasis on making sure your bank money is covered by FDIC insurance. Cash is only valid until the bank doesn’t go belly-up.

Looks like banks are not simply done with writing down their assets.

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