More and More Are Figuring Out the Money Supply Is Not Growing

This from Washington's Blog:

Former officials are often more honest than current ones, since they aren't under pressure to spread happy talk.

Former European Central Bank chief economist Otmar Issing recently said what current officials aren't addressing:

Nobody can be sure that we have a self-sustaining recovery. The challenges facing the ECB are tremendous. "Money multipliers have collapsed everywhere. What M3 is telling us is that confidence is missing. I don't see any way to stabilise M3 in such circumstances.

As Ambrose Evans-Pritchard notes:

Data from the European Central Bank shows that the M3 broad money supply has contracted over the last six months, confounding expectations that ultra-low interest rates would soon boost monetary growth. Loans to the private sector fell 0.3pc from a year earlier, the first such decline since the data started in 1983.

The M3 figures include a wide range of bank accounts...

The picture is even starker in America where M3 has shrunk at an annual rate of 6.5pc over the last three months, a pace of contraction not seen since the 1930s. US bank loans have plummeted since May

What's going on is that the Fed has started to pay interest on balances left at the Fed, which explains why the multiplier isn't working in the states, but further the real interest rate must be real low both in the US and in the ECB sector, since if real rates were significantly higher in either area, banks would be making loans (adjusted for risk, of course) versus keeping the balances sitting at the central banks.