Breaking (up the Euro) news. Eurzone housing market might be crashing

from Merijn Knibbe

Today, the European Central Bank published new data on M3 money growth in the Euro Zone

The data are entirely consistent with: DISASTER LOOMS

* the growth rate is down, from a revised 3% in September to 2,6% in October. That’s way below target (4,5%) and a large drop for one month
* more important:
- there is a clear flight into cash (surprise!). That’s bad news when it comes to the economy (people don’t trust their deposits anymore, i.e. a bank run) but good news for governments. Banks are allowed to create ‘deposit’ money but only the ECB is allowed to create cash. Every billion transformed from deposit-money into cash-money is a billion of seigniorage profit for the ECB (and hence European governments). The banks literally have to buy the cash from the ECB, to fill the ATP’s.

- the month on month growth rate of ‘lending for house purchase’ is with -18 billions (about minus 6%) an absolute disaster. This rate is influenced by ‘noise’ and might be somewhat higher than the underlying rate. But for the same reason the opposite can be true, too! Considering the present situation it is entirely possible that the EZ housing market is experiencing a flashcrash. More information is needed, but it is urgent to find this.

Can anybody explain to me, once again, what debt deflation is all about?

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