Remember this post from last year: Zero Hour Approaching Fast?

Read that first.

It gets better. Demand deposits have started to crash from their peak suggesting that a slow run on the banking system is underway.

Click image To Enlarge




The M1 multiplier is already suggesting that money is being withdrawn from circulation. And what money the Fed is pumping in isn't making it into circulation either, as the banks are hoarding it. And now, demand deposits appear to be collapsing.

By the looks of things, bank runs have started and the hoarding of cash is in full force and it is all being reinforced by a negative feedback loop created by the Fed itself.

Maybe a bank holiday was what Obama was referring to earlier today. From the AP: Obama: Catastrophe coming if rescue isn't passed


Update: I'm not the only one seeing it this way. So is Lee Adler:

Lo and behold, Demand Deposits had been spiking along with the gain in IMFs until the week of December 29. From then until the last data point on January 19, the series collapsed. This is concurrent with the shrinkage of the Fed’s balance sheet, the bond price crash, and the swoon in stock prices over the past month. I assume that this chart will only look worse when the data from the past two weeks is appended.

The abrupt reversal in the chart of demand deposits not a good sign. I have been arguing for a long time that the massive increases in money supply numbers were pure fantasy. Now we may be beginning to see a dose of reality.Looking ahead, if a whole lot of people decide that they want their money they will find that it’s not there, just like Bernie Madoff’s clients did. The reported money supply data is no better than Madoff’s account statements were.