Where is all the money?

thank you for all the responses. I have a lot to look over. I do understand the frational reseve aspect of banking. I just don't see how inflation hasn't hit us YET. Money always goes somewhere and when I look at us deposit rates and the money paid out the numbers just don't add up. Realistically it would take a team of economist months to track it down and say where it went exactly.
Thanks again.

inflation has hit, but it's in asset price and ultra-luxury goods for the most part. The trick is that those who are closest to the point of money creation get the benefit of first use (known as the Cantillon Effect in economics). Asset classes around the world that benefit from the creation of debt have increased significantly, as well as the luxury goods that are bought by those who profit. There are bubbles in real estate, bonds and stocks all over the globe. These are the asset classes that can be most separated from the economy. You have price deflation in commodities, oil, gas etc...those goods where real demand plays an important role in setting price (ie the real economy is deteriorating, the debt fuelled false economy is bubbling).

The reason that reported inflation is so low (aside from the shenanigans involved in coming up with the number, which has the effect of reducing the reported inflation) is because the new money doesnt have the velocity necessary to then wash through the economy, it gets caught up in banks at the end of the day or as reserves on a central bank balance sheet. Banks have excess deposits on hand (last time I checked, JP Morgan had over $500bn....this is why the London Whale incident happened), and money isnt bidding up the price of goods and services, only rentier assets.

When the assets that have been purchased start falling in value, suddenly the money created is not backed by anything and the sale of assets doesnt pay off debt. The issuers of the debt take huge losses, or must be bailed out. This is why inflation is so important, and why deflation is demonised. The system collapses without inflation and increasing debt.

a reply to: zvezdar

Thank you for this post. I actually learned from that and understood it.

a reply to: jlafleur02

Where?

Most of it sits in Bank reserves and corporate coffers.
You would be astounded how much they are sitting on in total.
Just for example look up Apples cash reserves.
And that is just one company.

a reply to: jlafleur02

you are completely neglecting drug monies... lets guestimate that there is ~ $1 Trillion in money velocity in that underground world of transactions that is circulating every 10-12 months without stop

those unproductive monies help cause restricted productivity from a distracted population thus the lack of desire or drive to create an income stream.... the drug underworld economy is a anchor dragging bottom and slowing the otherwise rampant expansion of a forever growing & consuming population of hedonistic, gotta have it people

a reply to: St Udio

newest relevant article....

TITLE: "IMPORTANT GOLD CHART: Every Investor In The West Needs To See"
dtd 23 March 2015

The Western powers are in serious trouble.
The once great British Anglo-American Empire, the envy of the world, now resembles more of a phony Hollywood Set backed by a mountain of worthless derivatives and debt.
The only thing holding up the Western Financial Empire’s House of Cards is faith that market will continue to believe increasing debt and monetary printing are practical solutions for long-term prosperity.

srsroccoreport.com...

the asymmetric war, including the Russia-China-BRICS banking & code system is steadily grinding the present financial-economic System of NY-London into the dust.... let's hope that the Rotschilds' don't tinker with the new money/asset paradigm of trustworthy Central banks & the scores of 'utility' banks without that fractional reserve BS goading those banks into fraud and derivatives exposures on two separate sets of books, (like it is now)

edit on rd31142714877423122015 by St Udio because: (no reason given)

Inflation from money printing is not going to trickle through, its going to happen all at once. We don't know when, it's possible no one really knows exactly when. We only know it's overdue like we know the big earthquake is overdue.

Why no trickle and why all at once? Below are teasers from the understanding you seek.

"The dollar is so vastly overvalued today because the rest of the world has kept it on life support for 30 years past its expiration date. It is the stability of dollar prices at that small marginal flow that sustains the illusion of wealth in the entire, massive monetary plane."
fofoa.blogspot.com...

"How will "the Elite" profit from hyperinflation? By being the first to spend the bills with new zeros added and thereby outrunning the rest of us in the race to spend and winning the competition to retain standard of living. Hyperinflation is the end result of the dollar-debt timeline, there is no other way it can end. Only the severity is a variable to be considered."
fofoa.blogspot.com...

IOW Painterz, A Snake eating it's own tail LOL Arjunanda
Second a reply to: Painterz

originally posted by: zvezdar
inflation has hit, but it's in asset price and ultra-luxury goods for the most part. The trick is that those who are closest to the point of money creation get the benefit of first use (known as the Cantillon Effect in economics). Asset classes around the world that benefit from the creation of debt have increased significantly, as well as the luxury goods that are bought by those who profit. There are bubbles in real estate, bonds and stocks all over the globe. These are the asset classes that can be most separated from the economy. You have price deflation in commodities, oil, gas etc...those goods where real demand plays an important role in setting price (ie the real economy is deteriorating, the debt fuelled false economy is bubbling).

The reason that reported inflation is so low (aside from the shenanigans involved in coming up with the number, which has the effect of reducing the reported inflation) is because the new money doesnt have the velocity necessary to then wash through the economy, it gets caught up in banks at the end of the day or as reserves on a central bank balance sheet. Banks have excess deposits on hand (last time I checked, JP Morgan had over $500bn....this is why the London Whale incident happened), and money isnt bidding up the price of goods and services, only rentier assets.

When the assets that have been purchased start falling in value, suddenly the money created is not backed by anything and the sale of assets doesnt pay off debt. The issuers of the debt take huge losses, or must be bailed out. This is why inflation is so important, and why deflation is demonised. The system collapses without inflation and increasing debt.

I am guessing this is what happened in 2008, The price of homes fell making the assets held less than what was owed and everything crashed. I would think the falling prices of bonds would do the same thing. If the interest rates start going up we should look for another crash. This time it seems it won't be so pretty as its the money that loses its value.
Either that or we see rapid inflation. Inflate the dollar to increase the value of the assets averting a crash.

Basically, yes, and it spread throughout the financial system because of the mortgage backed securities that were owned by everybody under the sun (suddenly worth much less), and in turn the credit default swaps that were sold to protect against those same companies failing. That's essentially why Lehmann failing triggered such a crisis, the system was so intertwined it only took one domino that was large enough to bring the whole thing crashing down.

Interest rates going up will be a result, not the catalyst IMO. It's very difficult for the bond market to crash with the central banks as a buyer of last resort, it would take a monumental amount of simultaneous selling. A large enough bank run in a large enough country could be a catalyst for such an event; banks essentially must hold a large amount of govt bonds to satisfy liquidity rules (another reason why there is not so much liquidity in the bond market in terms of bids), and a run or other liquidity event would necessitate large-scale selling.

The Fed could be stupid enough to raise rates but I am not convinced. There will be something else that triggers the next round of dominos falling. A small example is the recent failure of an Austrian bank that is slowly but surely spreading to German and other banks. It could be something like the wider market realising that China's growth is nothing like 7%, or one of Europe's zombie banks finally running out of luck. There are many possibilities for a trigger right now.

There have been indicators of stress that generally havent been in the public view. There was a period early in the year where liquidity in emerging currencies almost completely dried up and very small transactions would cause exchange rates to move significantly. There have been a few sudden moves in various markets for very little reason.

Lastly, the central banks are all but out of ammunition. Rates are zero or negative, and QE programs are still going strong (US excepted...and hence no growth). The only thing left, literally, is outright monetisation without even pretending it is QE. Japan is closest to this. The central banks wont be able to just cut rates severely and bail out the banks, they blew the chance to clean out the system in 2008 and we'll pay a bigger price the next time.

Simple answer: The Evil Stupid Rich have hoarded it all. Now that's an easy answer Arjunanda.
Second
a reply to: jlafleur02