0% interest rates (US), money printing: but where is all the money going?

The US and the global banking system was close to implosion in 2008, with balance sheet holes that were so billion dollar big it was unprecedented. The US government's $700 billion dollar (TARP) bailout monies was gobbled up in large portions from Wall Street and America's biggest banks like Citigroup and Bank of America. After more than two years the banks are still reliant on tax payer assistance as the banks and credit lenders appear to be sucking more money in than money going out i.e profits. As discussed in The 2009 'Obama bounce' / liquidity rallies have come to an end. (*revised) we are seeing profits down but revenue up, which translates to a money supply orientated boost in revenue, but unable to maintain profit even with constant or growing revenue. This occurred recently with Visa, "Visa Inc.'s (V) fiscal third-quarter profit dropped 1.8% from a year ago but revenue jumped 23% as consumers ratcheted up spending and the company processed more payments."

So with profits falling and revenue looking stretched (refer to Citigroup lower profit at 37% and low revenue, which means that the bank has cut it's risk position in the market) and a drying up of the M3 money supply refer to chart:



A funding/liquidity squeeze mixed with a possible new credit crunch (via banks utilizing risk again) could lead to a festering banking problem in the US.

US banks are still going bust with 7 banks failing on the 27th July 2010, it would appear that the banking crisis and credit crisis is still lurking that could strike the bigger banks at some point (further write-downs). With Basel 111 rules being somewhat delayed till 2018, if the banking sector decides to take on risk again to boost profits ala from the CMBS market, or other derivative markets. A new credit crunch will ensure.

Despite 0% rates and a peak in money supply in 2008/2009 liquidity has either drained out quickly (via Fed refinance operations), and/or has been sucked into depreciating 'black holes' on US bank balance sheets.