M2 to FRB Assets: An Interesting Ratio

This chart shows the ratio of M2 to FRB assets. The observations here are quite interesting. The Fed has pumped money into the banks and the money has not come out the other side. The normal ratio, historically speaking, is a 45:1 ratio. We are now seeing an almost 15:1 ratio. This means that banks are hoarding the money put in, as evidenced by the lack of small business credit, and secondly when the money does ever start to flow that there will be the potential for massive inflation. The more we look at this ratio the more we believe that it is a useful metric to anticipate a functioning banking system and the risk of massive inflation. Despite the current Administration's rhetoric regarding what they are doing for small businesses it seems clear that there really is little if anything being accomplished. The flow of the stimulus money from the Federal Government to the states, without any sense of accountability, will result in a great number of tales of waste, fraud, and outright theft.