I took another look at the CONSUMER and TOTBKCR series from the Federal Reserve, and noticed that not only did consumer loans somehow increase $80 billion, total bank credit increased some $400 billion last month. As pointed out over at the market ticker, this could very well be upcoming changes announced by the FASB showing up. It isn’t completely unthinkable that Wells Fargo, BoA or some other of the piles of junk have decided to move in some off-balance-sheet toxic waste onto their regular books. Come to think of it, someone predicted that if this was to happen, it would cost the major banks AT LEAST $30 billion.
There is however another, more scary theory. Question : Who can borrow $80 billion in one month? Answer : A handful of extremely wealthy individuals that decide to run up their debts to the max, and buy real stuff with the money, because they know that the dollar is toast. Who cares if you have $80 billion in debt if you inflate it all away the next decade. Indeed – this kind of strategy would make sense as long as the rate you borrow at is lower than the inflation rate. Two question remain, namely what will this people purchase, and when do we see this money hit the money supply figures?
For now, the first explanation seems more viable, or that the figures are some statistical adjustment fluke. Let’s hope so, otherwise there is going to be very disrupting things showing up in the money supply figures. Meanwhile, a one-man-army is attempting to force it’s way into the backrooms of Washington :