Posted on 12/27/2005 6:20:46 AM PST by hubbubhubbub
Over the past few days, December 21st — when our first Hindenburg Omen (of whatever cluster is coming) — and Thursday December 22nd, the Federal Reserve has conducted one of the largest two-day Repo injections of money into the system since back in September 2001. On Wednesday they added $18.0 billion in reserves and on Thursday they added another $20.0 billion. Is this a coincidence, coming right as we get another Hindenburg Omen? Probably not. Is something high-risk going on behind the scenes here? Let’s review some facts at the Fed. On November 10th, 2005, shortly after appointing Bernanke to replace Greenbackspan, the Fed mysteriously announced with little comment and no palatable justification that they will hide M-3 effective March 2006. M-3 has been the main staple of money supply measurement and transparent disclosure since the Fed was founded back in 1913. It is the key monetary aggregate that includes Fed Repo transactions, that mechanism whereby the Fed increases reserves. The date when M-3 will start being hidden also happens to be the exact month that Iran will declare economic war against the U.S. Dollar by trading its oil in Petro-Euros on its new bourse. But there is more. The Federal Reserve currently has three vacancies within the 19 top Regional Bank and Board of Governor spots. Why? Part of ongoing wholesale resignations.
The latest is from the Philly Fed. Fed President and Open Market Committee member Anthony Santomero has announced his resignation after only a brief year and a half tenure. Very unusual. Hey, Fed Presidents are treated like gods. They have enormous power, prestige, and presence. Why quit? He is far from alone. Over the past few years no less than six Federal Reserve Regional Bank Presidents have resigned. This is highly unusual.
An immediate impact is that we are about to have a largely inexperienced batch of individuals conducting monetary policy in the United States. So of course, the first thing they will do is hide the key money figures. Two positions for the Board of Governors (there are 7)have been open for quite a while. Plus six of the 12 Regional Head spots have turned over during the past few years.
If a substantial amount of oil transactions will suddenly be conducted in Euros instead of Dollars, this should put pressure on the Dollar as folks exchange Dollars for Euros, jeopardizing the Dollar’s status as the world's reserve currency, making it more difficult to print all the dollars the Fed wants to without driving the Dollar into the ground. Iraq threatened to do what Iran has threatened to do just before we went in looking for weapons of mass disappearance. If the Dollar tanks, Treasuries might not be far behind. If Treasuries tank, kiss the Housing-driven boom goodbye. Could the Master Planners be hiding M-3 because they anticipate they may have to monetize the Federal debt, buy our own Treasury Bonds during the coming economic attack against the Dollar? That would require a ton of new fresh money creation — too much to disclose. Could it be some folks at the top of the Fed do not have the stomach to be part of what is about to go down?
M-3 has a direct but lagging impact on financial markets. Look at the chart. Whenever M-3 rises, the Dow Industrials rise. Whenever M-3 is flat or declines, the Dow Industrials decline. The Dow Industrials are a bellwether for the economy. If we can monitor M-3, we can better monitor the future path of equities and the economy. It is wrong for the Fed to stop its disclosure for this very reason. Investors need to know in a free market economy, because M-3 infusion is centrally planned intervention into a free market system. Investors need to know when the Master Planners have decided to intervene. Our buy/sell signals were designed to pick up the scent of Master Planner intervention by analyzing supply and demand forces underlying the markets. So with or without a fully disclosed M-3, we will be able to continue to identify coming multi-week trends.
So what about M-3 the past week? The latest figures show that on a seasonally adjusted basis, M-3 rose 27.3 billion last week, a 14.0 percent annualized clip, and is up $76 billion over the past month, a 9.8 percent growth rate. But those are the massaged numbers. For the raw figures, fasten your seat belt. Are you ready? M-3 was increased $58.7 billion last week (that does not include the huge Repo infusions noted above), a 30.0 percent annualized rate of growth. For the past two week, the Fed added $93.5 billion to the money supply, a 24.0 percent annual clip. Over the past 6 weeks it is up $192.9 billion, a 16.7 percent Banana Republic hyperinflationary pace. This is nuts, folks — unless there is an incredible risk out there we are not being told about. That is a lot of money for the Plunge Protection Team’s arsenal to buy markets — stocks, bonds, currencies, whatever. This level of irresponsible money supply growth makes shorting markets hazardous, yet at the same time says markets are at huge risk of declining. Maybe M-3 growth doesn’t stop the decline this time. Should be a fascinating storm in 2006.
The recent rise in Gold catalogued 74 points over about a month, a 16 percent rally from precisely the day the Fed announced it would hide M-3 from taxpayers and citizens of this great nation. That is no coincidence. Gold sees hyperinflation, monetization of debt, and intervention into free markets. Gold is telling us it expects Ben Bernanke to be an inflationist.
Don’t miss Dr. McHugh’s interview with CBS radio at WWJ 950 AM on December 30th, 2005. You can access this station through the internet by clicking on www.wwj.com . Jayne Bowers presents Dr. McHugh’s views on the Fed’s decision to drop M-3, the Plunge Protection Team, and new Fed Chairman Ben Bernanke.
“For a child will be born to us, a son will be given to us; And the government will rest on His shoulders; And His name will be called Wonderful Counselor, Mighty God, Eternal Father, Prince of Peace.” Isaiah 9:6
CONTACT INFORMATION Robert McHugh, Ph.D. Main Line Investors, Inc. TechnicalIndicatorIndex.com Kimberton, PA USA
Bingo on that. Much of the taxes we currently pay are for an army of bureaucrats to tell everyone else "NO" when they want to do something.
Nope. Nothing to do with it. Regulations or not, China would still have .37 an hour average wages while we have a much higher standard of living. Not because of regulation.. but because of supply and demand working within the market. Negotiations and competition drove wages and benefits until guys like you decided to find someway to point blame at anything possible for selling out America for profit. At least the Rosenbergs were executed honestly for their version of it.
So, you think I should be executed. Thanks for the sentiment.
But I ask again, if you do not support free trade, what do you support? Central planning? Are you a commie?
Hogwash. Transacting oil in Euro instead of dollars may mean that the buyers need Euro's to buy the oil. Fine. But what about the sellers? they now have euro's that they need to convert (sell) into whatever currency they need to use for other transactions. So the buying pressure on the dollar that goes away is exactly offset by the decline in selling pressure that the crude sellers exert.
the author's analysis is either half-baked or deliberately misleading. Either way it is hogwash.
Incidentally, we would pay some jobs a lot less, except that there's this minimum wage thing. That's not supply and demand, and it's not free market. Instead, it's a legislated cost of labor - that you deny. And it's just the tip of the iceberg. What we have here is far, far from a free market.
If the world's currency of reserve is the euro rather than the dollar, that makes a big difference to the originators of the dollar.
What happens to the dollar when the oil providers will no longer accept it for oil?
You really think the world is going to depend on a currency that's controlled by the Germans and the French? Good luck with that. LOL!
You can't eat dollars. They have no industrial use.
You can't eat gold. It has very little industrial use (unless, of course, when there's blood in the street, those with product to sell will want gold so they can give their sweetie a nice birthday present).
Gold and, for that matter money, might as well be tulip bulbs.
Just because some in the past put some mystical value in gold doesn't mean it's true today. In fact I think that salt was a far better form of specie.
It isn't up to me. Perhaps you'd like to enlighten us why some countries have indeed done exactly this. (Although it could be that the French and German printing presses aren't in quite as high a gear as the American ones are.)
There are a lot of stupid people out there.
(Although it could be that the French and German printing presses aren't in quite as high a gear as the American ones are.)
Their economy, their military, their printing presses.....there are many things that the Germans and French don't do as well as the US.
That's the biggest load of BS I've ever read on this site. Bring the corporate tax rate to 15% or less and kill the regulation and you'll see this country's GDP skyrocket.
Our labor comes from automation now. Get some new skills - protectionism is for looters.
Maybe a goldbug on this thread can explain why M3 is so important? This clown says hiding M3 will allow the Fed to increase the money supply and no one will notice. Maybe he doesn't know the definition of a Repo?
Repurchase agreements(when transacted by The Federal Open Market Committee of the Federal Reserve) initially add reserves to the banking system and then withdraw them; reverse repos initially drain reserves and later add them back.
Or maybe he doesn't understand the difference between temporarily adding reserves and permanently adding reserves? Goldbug clarification of his fear would be greatly appreciated. Quickly, before the Hindenburg Omen becomes a reality. LOL!!
You are correct, but don't confuse "reserve currency" with what a commodity is denominated in. A reserve currency is the currency in which central banks settle transactions with other central banks and in which they hold their excess reserves. That is a wholly different concept from private transactions between buyers and sellers of oil.
Now, should the central banks decide that they no longer wish to hold excess reserves in dollars (Treasury bonds and notes), then there is a demand shift for dollars. You have unleashed a large stock of dollars onto the market. For a lot of reasons, that is unlikely to happen; the foreign central banks would be cutting their noses off to spite their faces if they were to dump dollars. At the most basic level, a dollar collapse kills the US economy (can't afford those cheap chinese things anymore), so then where are they?
But that's got nothing to do with how a commodity is priced. As I said in my earlier post, the decreased buying pressure on the dollar is offset by the decreased selling pressure on the dollar. it's a wash.
This misleading article was authored by someone who either doesn't understand capital flows or intends to mislead.
So the money supply is growing too fast? How fast should it grow? Gold is great.....what is its dividend yield? Or does it pay interest?
$196 Billion in six weeks!
Ignorance runs rampant in this world!
Bernanke is the guy who said, ... "that we can fight deflation with the printing press. We can drop $100.00 bills out of helicopters."
Funny, what we had before free trade seemed to work wonders for building our economy for years. Guess that must have been communistic.
I know you would pay some jobs a lot less, those you aren't offshoring. Those you are trying to use illegals to fill because you don't want to pay a market rate where someone can live off their earnings. That's what got government involved in the first place - for right or wrong. Ethical shortcomings of business are usually the cause of government intervention.
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