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REVEALING FED-UP/DOWN-ANALYSIS: THE HOUSING BUBBLE & M3
Nothing to be afraid of. Economics can be quite simple - if you OVERstand it. Please, read on...
The housing bubble is in the early stages of implosion. We do not know for sure how long the adjustment will take or are we sure how deep it will be, but we do know it has to happen and that the risks to our economy and the world economy are enormous.
"The only thing the Fed can do is keep interest rates relatively low and keep increasing M3, money and credit at a 12% plus rate. The downside is hyperinflation. If they move interest rates higher and cut back on monetary aggregates, they’ll have a depression. If they keep doing exactly what they are doing now, the economy will slide downward and inflation will relentlessly increase." (Bob Chapman)
Now see this "announcement" just in a few minutes ago:
Fed Expected to Boost Rates Quarter Point
By JEANNINE AVERSA
AP Economics Writer
WASHINGTON - Expect higher interest rates from the
Federal Reserve in the months ahead. It's more of a mystery whether policy-makers will extend their 18-month credit-tightening campaign beyond
Alan Greenspan's tenure.
The central bank gradually has increased rates for 18 months to control inflation. At Tuesday's meeting, the Fed is expected to add one-quarter of a percentage point to an important short-term interest rate, known as the federal funds rate.
That would mark the 13th such increase since June 2004 and would put the rate at 4.25 percent, the highest in more than four years.
Economists are divided about what will happen after that, saying the Fed could:
_boost rates by one-quarter of a percentage point at its next meeting, on Jan. 31, and then stop.
_vote for an increase in both January and at the following meeting, on March 28, and then move to the sidelines.
_commit to the campaign until the funds rate, the interest banks charge each other on overnight loans, reaches 5 percent.
"There is short-term certainty and medium-term mystery for the Fed," said Carl Tannenbaum, chief economist at LaSalle Bank, who is in the 5 percent camp....
M3 represents the totality of the money supply in all forms. Since November of 2003, the Fed has permitted (inflated) the money supply by more than 12%. This violates the most cardinal rule of fiscally sound expansion of money/money substitutes (principally bonded debt securities and its appurtenances, such as derivatives, option contracts) in circulation, that it must match a rising level of DOMESTIC production.
Consumption in the US vastly exceeds production.
The Fed has raised interest rates twelve times in four years, BUT simultaneously has placed more monies in circulation, which cancels out the effect of higher interest rates, which are to slow the creation of new debt by lowering the market price of old debt securities, thus raising their yields (yield = the actual rate of return on the market price of a bond, as opposed to the interest rate on its face value).
The Fed has been lying through its teeth (and the Bureau of Labor Statistics, OMB etc.) about the real rate of inflation, which through mathematical legerdemain, they claim is under 4%. Nyet. It is north of 12%.
Therefore FOMC has decided to stop publishing the M3 figure, which is the most glaringly obvious leading indicator of the real rate of inflation.
M3 was up $2.1 billion to a record $10.112 trillion. Over the past 28 weeks, M3 has inflated $494.2 billion, or 9.5% annualized. Year-to-date M3 has expanded at a 7.3% rate, with M3 less money funds expanding at an 8.2% pace.
Again, the whole thing is monstrously simple: Do not dump US certificates of debt but hold them as chips which we will cash in for you when the moment is right. But sell them off and what you may end up holding as a substitute reserve is so much worthless paper, again. We have ways...
Japan is in the same predicament but with twice as much US Treasury paper, and a concatenated international/domestic debt structure which, if they abandon the Dollar, will be catastrophically impacted.
As both countries are highly dependent upon exports sold in Dollars, while their energy imports are paid for mostly in Dollars, neither can be said to be in the catbird's seat.
The only "commodity" which America produces in fabulous quantities are certificates of debt.
That's why M3 inflation must be hidden.
Best...
Hadashi
Basically, gain control of companies and take the dividends and earnings which would have been paid-in/retained capital (equity), and substitute the difference with debt (liabilities). Remember: liabilities + equity = assets.
Easy money come, easy money go...
And don't forget - Iran has announced to open this "alternative" Oil-Stock-exchange on EURO-BASES by March 2006...
War on 'error, Part 12: "One percent for all those mooney- twelves" Far Sight 3
