Still No Growth in Money Supply; What Next?

M2 (nsa) over the last three months is essentially flat coming in at an annualized decline of 0.13%.

There are a lot of questions from here.

Forget about draining reserves, Bernanke, at some point, may have to add more. Not because he wants to, but to help bailout one of these heavy Treasury auctions that don't find any significant support.

What happens then? How does all this sequence out? How much time will the dollar have to show a little muscle, before the debt overhang is recognized by the world as a great inflationary force that will run Bernanke's money pumping arm?

Debt offerings will slow as we get closer to the holidays, and not pick up again until after the first of the year. Thus, if we make it through the next few weeks without a major auction fail, the dollar could have a nice spurt.

The easy bet, the obvious bet, is on volatility. It is coming, like we have never seen it before.

Down stock market, up dollar, down bonds, those are the volatility plays. The moves are going to be big. Mix and match guys. Mix and match, don't stick your neck out just one way, you may not survive the recoil.