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
I cant believe someone would argue in favor concealing M3 on this forum... but then again...anyone who equates debt with worth is not to be listened too..
When the Fed conceals M3, and Bernake is in place...you can watch the beloved dollar resume its multi-year downward spiral...
Coincident with that will the next leg up in gold and commodites from a dollar denominated perspective...
BTW...did you happen to notice the yield curve inverted in the bond market today for a moment for the first time in 5 years?...what happened 5 years ago to the market...
Good luck...your going to need it...
You would be better served if you looked through his politics...the substance of his arguements (facts) are solid...
Good luck...The best place to be in this market right now is out...
"If the dollar loses it's status as world reserve currency .. our way of life ceases."
Look at the bright side. A weak dollar is good for US manufacturing, agriculture and exports.
Please explain what M3 shows that isn't in M2.
... but then again...anyone who equates debt with worth is not to be listened too..
Didn't say that. Household net worth is at an all time high.
Who said it was scary?...
Are you paranoid or somthing?
LOL...
No...its a sharp intraday sell off of the SP500 March Contracts...
Healthy selling...not to worry...the next Bull Market is here...
This is a buying opportunity...
He ehe...Just ask that idiot Jim Crammer...he will tell ya...
The German government essentially said the same thing in the 1920's.
Tulip bulbs don't exactly have a multi-thousand-year history of value, and now that transportation makes a trip to the beach a simple matter, salt doesn't quite have the rarity thing going for it any more.
If you keep on with the logic of my reasoning the problem is that we would seriously increase the value of the euro.
The potential for it displacing the dollar as a reserve currency would be put into motion.
The result would be that in order to continue to service our debt we would have to increase the interest rate that we pay on treasuries.
There is no flaw in my reasoning. The value of the dollar is what would be at stake.
If we are unable to service our debt then the option is default. Given that we must sell a billion in treasuries every day just to serve the interest we currently must pay the potential for allowing the dollar to fall from favored status must be avoided.
You say that as if inflating the currency by tens of billions every week were a good thing. I don't think so.
Wow, almost back to where we were last Wednesday. It's like Oct 1987 all over again!!!
I wish we would ban postings from Financial Nonsense Online. It is pure crap.
Buying oil with dollars sends dollars out into the world. Selling dollars to buy Euros sends dollars out into the world. I'm not seeing a huge difference.
The potential for it displacing the dollar as a reserve currency would be put into motion.
Arabs can take their oil dollars and buy Euros with them now.
Given that we must sell a billion in treasuries every day just to serve the interest we currently must pay the potential for allowing the dollar to fall from favored status must be avoided.
Sure, if the world wants to buy French/German Euros instead of American dollars that would raise our cost of capital. Don't see it happening yet.
Illegals are cheaper partly because you don't have to pay health insurance, SS, withholding taxes... Take those expenses out of an American's wage, and the pay we give to illegals looks pretty good in comparison. And they are, once again, all legislated.
Coincident with that will the next leg up in gold and commodites from a dollar denominated perspective...
BTW...did you happen to notice the yield curve inverted in the bond market today for a moment for the first time in 5 years?...what happened 5 years ago to the market...
If anything, the yield curve indicates a strengthening dollar, especially when one considers that the EU funds rate is much lower. Bernanke needs to end the current tightening trend. There's no need to cause a recession, though Greenspan seemed to enjoy them immensely.
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