What's the Fed Up To With the Money Supply?

[Clara T]

December 23, 2005

What's the Fed Up To With the Money Supply?
by Robert McHugh

Over the past two 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.



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 at the top of the prior page. 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.

http://www.safehaven.com/showarticle.cfm?id=4331&pv=1

[cspanlovr]

1. Let me be the first to say HOLY SHIT!

[Clara T]

2. Consider this as well:

DaanSpeak: Is the money that the Plunge Protection Team uses for this virtual money, do they simply let the printing presses roll?
Willem Middelkoop: 'In a certain sense all of the money has already become virtual. Money can be created out of nothing because our money is no longer backed by gold. Central banks can actually create money from nothing, just like commercial banks: If you for example take out a mortgage with a bank, money is created on the spot where there previously was none. That's not the same kind of money as your neighbor has in his savings account. This is money that is rarely given to you in the form of banknotes. If you buy a house, that money is simply remitted to the previous owner of that house. So that's a transaction that is purely digital, a form of virtual money. In this way central banks can create money. The Wall Street Banks are a component of and the owner of the American Central Bank, the Federal Reserve. That bank does not belong to the state, it belongs to the big Wall Street banks. And in principle they have unlimited potential, unlimited and deep pockets with which they can purchase what they want to purchase and prop up what they want to prop up. And now that they are going to cease publishing the money supply data starting at the end of March, a very important indicator for the people who follow these things is going away, the proof is being removed.

If you take a look at the past ten or twenty years, you see that there has been an enormous amount of money created out of nothing. You know, we do this in Europe also, the total number of outstanding mortgages in Europe is rising at a rate of 10 percent per year, the total amount of money in circulation is rising at a rate of 8.5 percent per year, but the economy is growing at only 1 percent per year. That should lead to a loss of purchasing power, that should lead to inflation, and that of course also leads to a loss of purchasing power. It's only in the official numbers that it is not totally visible. But you need only take a look at what you are paying for a beer or for some french fries: you are now paying two euros, and a number of years ago it was two guilders. That demonstrates a loss of purchasing power and that also explains why so many people, especially in the middle class, are having a lot of problems, because you are really not compensated for the loss of purchasing power.'

http://www.daanspeak.com/InterviewMiddelkoop01Eng.html

[Roland99]

3. So Europe is financing "growth" via debt, too?

[ret5hd]

4. the entire world is...

if it's a fiat system, it is being inflated.

[TAPat]

5. I am seeing little bits and pieces

on this subject coming up more often.
Now I'm no economist, but it seems rather clear to me that we have become ensnared in this Dubai port deal in exchange for the UAE not switching to Euros for their oil transactions. Iran (as mentioned) has threatened this course, as I believe Venezuela has as well - and Venezuela is now in "our sights". I wonder, does Syria have oil reserves...
So, going after Iraq was really less a "War for oil" as it was a war for continuing to artificially prop up the dollar. This administration has built an entirely unstable house of cards...