The Fed's Money Supply Armament is Underway

SafeHaven.com ^ | Jan 8, 2006 | by Robert McHugh

[Jack Black]

M-3 has been launched into outer space, up another $56.3 billion last week, up $92.4 billion over the past two. This is some real horsepower. Over six weeks, the meaningless figure, ahem, is up $177.8 billion. These annualized growth rates are 28.7 percent, 23.6 percent, and 15.3 percent respectively. Those are the seasonally adjusted figures. The raw, non-seasonally adjusted, figure is up $293.3 billion over the past 12 weeks, on a pace to add 1.2 trillion in money to the economy. Wow. There must be a need for this. Maybe the master Planners see a coming need to monetize our debt? To support markets? They tell us the economy is good, so clearly they cannot be stimulating our way out of a recession. There's a lot of money flooding the economy and it has to go somewhere. Right now it is lifting markets.

The following is pure educated speculation: What if Iran goes through with its threat to sell oil for Euros instead of U.S. Dollars? Well, then Dollars won't help you much if you want to buy oil from Iran. So, you sell the Dollars you are holding for Euros. Whenever anything is sold en masse, its value drops. This means less demand for Dollars, which means the Fed will not be able to print excessive amounts of Dollars without further driving down the Dollar's value. There would simply be too much supply. Right now, the Fed can print all the Dollars they want because the demand for Dollars has been on the rise, especially as the cost of oil has risen. In other words, lately it has taken more Dollars to buy oil, so the demand for Dollars has been up. Again, this extra demand has allowed the Fed to print all it feels like with little consequent damage to the Dollar.

However, if the Dollar were to tank - and the Iran oil Bourse should push the Dollar in that direction - it puts pressure on Treasury Bonds and other U.S. financial assets to fall as well, since they are denominated in a declining-value currency. In this event, the Fed would have to step up its buying of U.S. financial assets to lend support to these asset prices - to stabilize U.S. markets. In other words, the Fed would have to monetize the U.S. Treasury's debt, and also monetize equity markets (be the buyer that keeps prices from falling). This would take so much fresh money that the Fed would need to create it in secret. Thus, they would have to announce that they are no longer going to transparently reveal the level of the money supply, but will hide it. The alternative is to punish Iran for - and make no mistake about this - effectively declaring economic war against the United States.

If this speculation is true, then the Master Planners are likely preparing accordingly. But if this is true, you just wish there would be more forthright communication with the American people.

lots of technical analysis here

Closes with:

Gold gets it, that too many Dollars is inflationary. Gold is rising because M-3 is going through the roof.

[saganite]

ping for later

[Moonman62]

The same people have been saying the same thing for how many decades now?

[Mase]

This would take so much fresh money that the Fed would need to create it in secret. Thus, they would have to announce that they are no longer going to transparently reveal the level of the money supply, but will hide it.

Activate the Plunge Protection Team and BUY GOLD NOW ping.

[Sundog]

Ping for later.

[Toddsterpatriot]

In other words, lately it has taken more Dollars to buy oil, so the demand for Dollars has been up. Again, this extra demand has allowed the Fed to print all it feels like with little consequent damage to the Dollar.

Gee, why would the Fed print more dollars? Oh yeah, demand for dollars is up. Gee, that was easy.

[Toddsterpatriot]

Whenever anything is sold en masse, its value drops.

Exactly, that's why the record levels of oil being sold has led to lower oil prices...errr....never mind.

[hubbubhubbub]

The nerve of this guy to question the wisdom of our Central Planners. Nothing to see here, move along.

[Santiago de la Vega]

MZM is also growing.

Here's the most recent data for the last few years.

Click on the thumbnail to see the full-sized chart.



Notice that money's been growing since the middle of 2005.

The economy'll be growing and more inflation is on the way.

We'll know we have problems when the rate on long-dated US treasuries starts to rise.

Here's the data on Treasuries.



Notice that interest rates are up a full percentage point since the bottom in 2003.

I'm amazed. The Fed has screwed it up again.

I never thought we'd see this kind of money growth in the face of an inverted yield curve.

The Fed will have no choice but to keep short term rates high for quite a while longer.

Gold has been warning us there's too much money in the system and I wouldn't listen.

Stand back boys, there's fun times ahead.

Lock in those fixed rate loans.

[Toddsterpatriot]

Notice that interest rates are up a full percentage point since the bottom in 2003.

Yeah, rates go up when the economy recovers.

I never thought we'd see this kind of money growth in the face of an inverted yield curve.

The yield curve is flat, not inverted. It's been flat for what, the last month?

[Jack Black]

"the same people" .. well, the growth in M3 is merely a statistic. You may choose to agree with the Fed that it's not even worth measuring, or, conversely you might not.

[nopardons]

At least two. LOL

[nopardons]

ROTFLOL...here we go again! This is getting not only tiresome, but boring.

The next thing you know, there'll be gold plated Reynold's Wrap.

[Mase]

..there'll be gold plated Reynold's Wrap.

Then will it be time for the Cross of Gold Speech? LOL

[Moonman62]

We're doomed!!!

[nopardons]

Oh yes, absolutely...someone WILL dig up old William Jennings Bryant and it'll be THE CROSS OF GOLD speech piped all over the land! ROTFLOL

[Jason_b]

What on Earth is so funny?

WJB's COG speech was given because the banking syndicates of the 1890's were trying to demonetize silver and go on a pure gold standard, which did happen. This was thought bad and potentially deflationary by the folks who wanted silver to circulate concurrently with gold and be coined "free" at the mint. WJB was running for President and lost.

All that has nothing to do with M3 or MZM today, or this thread.

If I may offer a hint, what savers and those about to retire are collectively being crucified on today is a cross of monetized debt and the associated inflation, which is partly why the savings rate is at an historic low. If a few folks think buying gold will preserve their wealth, or real estate will too for that matter, what's it to you?

[Jason_b]

"The Federal Government, with the cooperation of the Federal Reserve, has the inherent power to create money - almost any amount of it."

- The National Debt, Federal Reserve Bank of Philalelphia, pg. 8

And that is exactly what they have been doing. JB

religious link nonetheless tells truth about our communist money

[Mase]

what savers and those about to retire are collectively being crucified on today is a cross of monetized debt and the associated inflation,

Do you think inflation has been more volatile or less volatile since we went off the gold standard?

which is partly why the savings rate is at an historic low

Or, maybe it's because the government doesn't include 401K contributions or earnings from capital gains when they calculate the savings rate. But they do count the taxes paid on capital gains against the savings rate. What's funny is people who complain about the rate of savings yet have no clue about how it's calculated. Most people also don't realize that we have the highest per capita assets in the world which makes us the best savers in the world.

If a few folks think buying gold will preserve their wealth, or real estate will too for that matter, what's it to you?

This is funny too when one considers that the long term return on gold is less than inflation.

Gold bugs believe many funny things about M3, MZ, The Federal Reserve and others, which is why it's all relevant to this thread.

[nopardons]

LOL...you just don't get it and it doesn't really natter that you don't. The Crucified on a Cross of Gold speech is part of FR slang and always used on gold bug threads.

American s have notoriously been at the bottom of the barrel, vis-a-vis saving, for that past 50+ years. It has little to do with any of the reasons you gave. And FYI...today's inflation rates are far lower than they used to be. If you doubt that, look at what they were 25 years ago and then, 40 years ago and then....well, I can give you all sorts of dates, but you know where I'm going with this; I hope.