The Eurozone M3 broad money supply has contracted over the last 6 months. There is also a reduction of 0.3% in private sector loans. The M3 broad money supply is used to gauge the economy about a year's hence. There has already been patchy deflation in the Eurozone and this looks set to spread across the EU economy.
The M3 figures for the US are also now contracting at the greatest rate since the 1930s and their banks are not lending. The US government does not release M3 figures any more, but there are some (conflicting) estimates to be found on the web.
EU banks are still facing write-downs, especially commercial that have yet to be declared. Company insolvencies are also rising.
All that stimulus money has not helped. It has been soaked up by the markets because that is the safer place for it as far as the banks are concerned. Businesses (and families) are being slowly starved of credit.
We are now entering dangerous waters. A lethally toxic mix of high debt and deflation. We all know that inflation reduces the effect of debt, what will rampant deflation do? But what can the ECB do? There isn't much scope for further rate cuts for them.
Eurozone Money is split as follows:
M1 – Currency in circulation plus overnight deposits.
M2 – M1 money plus deposits with an agreed maturity up to 2 years and deposits redeemable at a period of notice up to 3 months.
M3 – M2 plus repurchase agreements plus money market fund (MMF) shares/units plus debt securities up to 2 years.
(The UK uses just two M0 and M4.)