What is the FED up to now? What is he hiding? What did he do in March?
Goodbye M3- What is the Government hiding?
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Updated- March 16, 2006
by Tim McMahon, Editor
I'm surprised we haven't heard much in the news about this but as of March 23rd 2006 the government will no longer be publishing the M3 money supply data. Most people probably say "Who Cares?" Right?
But you should care! And here's why:Here are some excerpts. But that is all small potatoes, M3 includes all of M2 (which includes M1) plus large-denomination ($100,000 or more) time deposits, balances in institutional money funds, repurchase liabilities issued by depository institutions, and Eurodollars held by U.S. residents at foreign branches of U.S. banks and at all banks in the United Kingdom and Canada." In other words, M3 tracks what the big boys are doing with the money. This includes US dollars held in banks in Canada and the UK (called Eurodollars) not to be confused with the Euro which is the standard currency of Europe. First of all, since when is the government interested in saving money? I've never heard of a government program being cut once it is on the books. There are stories of government offices being created for the purpose of WWII and continuing on for decades even though the employees had absolutely nothing to do! With all its efforts at "Tracking Inflation" most everyone agrees that the last thing the Government really wants is for the general public to know how much it is stealing out of your pockets through inflation.
What would happen if you started writing checks (creating money) from an account that was empty? You'd end up in jail! But that is exactly what the government is doing when it creates money out of thin air.
Enron isn't the only one who knows how to cook the books!
For years now in an effort to hide the actual amount of inflation, the Bureau of Labor Statistics (who tracks the inflation rate) has been erasing inflation through a trick called "hedonics".
Basically they say since a new computer is faster than an old one you get more for your money, so they adjust the price down.
So even though a new computer might cost you $500 they say since it is twice as fast, it is really only costing you $250. But try to explain that to "Best Buy" when you want to pick one up and see how far you get.
They use the same logic for cars and other things. Everyone who studies it knows the Government is fudging the numbers, but it has gotten so bad that now they have to hide the M3 altogether. On a nationwide basis (this includes Government, Business and personal) the U.S. only saves 13% of its GDP. But on a personal level the picture is much worse. Chinese households save 30% of what they earn while U.S. households save less than Zero! On average, we actually spend .4% more than we earn every year. Basically, the Chinese are loaning us the money to buy their stuff. And the Government is printing the money to do it. So my theory is that in order to hide all the money that is being created and sent to China the government is going to stop tracking M3. The Smoking Gun
It is no coincidence that the M3 went up an annualized 9.4% in the last three months and an annualized 17.2% in December alone and now the FED wants to stop tracking it!
Why bother tackling a problem of this magnitude when you can just bury the evidence? Who wants to leave a "smoking gun" laying around? A 9.4% increase in money supply should translate into a 9.4% inflation rate (if GDP produces exactly enough to counteract obsolescence).
Even if there is a 1% increase in the supply of goods, that still means that we really have 8.4% inflation rather than the 3.6% the BLS is telling us.
In order for the 3.6% number to be true-- we would have to have 5.8% more stuff than last year (9.4% - 3.6% = 5.8%). Do you have 5.8% more stuff than last year? I didn't think so.
The writing is on the wall. When the Government starts hiding data the problem is big! If this trend continues, inflation is going to come roaring back big time. We will see the late 70's all over again. The war is Iraq and the Billions in Hurricane damage have to be paid for somehow and the "hidden tax" is the easy way out.
Now is the time to begin stocking up on inflation hedges. Gold silver solar comodies. Right after the Olimpics.