World Affairs Brief March 31, 2006 Copyright Joel Skousen. Partial quotations with attribution permitted. Cite source as Joel Skousen’s World Affairs Brief
BIG INFLATION COMING Freemarketnews.com reported this week that, “the federal reserve ordered two trillion dollars to be printed! … Three separate sources in the U.S. Treasury have told me that this week, the federal reserve ordered TWO TRILLION dollars to be printed! The US Treasury is allegedly running printing presses 24/7 to accommodate that order. Treasury employees were specifically ordered not to talk about this to anyone because it could cause economic collapse.” That’s a bit inflammatory. Press officials are never supposed to tell how much money is being printed. Even another $2 trillion isn’t going to cause a collapse, though it would and will eventually impact the value of the dollar. I’ve always said that the US has not yet used up all its power to inflate. I guess the PTB are starting in earnest. It is important to note that in response to growing dollar weakness, silver is at a ten year high and gold is nearing a 25 year high.
Robert HcHugh lets us in on what M3 was doing recently – and it was very inflationary. “M-3 has been launched into outer space, up another $56.3 billion last week, up $92.4 billion over the past two. This is some real horsepower. Over six weeks, the meaningless figure, ahem, is up $177.8 billion. These annualized growth rates are 28.7 percent, 23.6 percent, and 15.3 percent respectively. Those are the seasonally adjusted figures. The raw, non-seasonally adjusted, figure is up $293.3 billion over the past 12 weeks, on a pace to add 1.2 trillion in money to the economy … That’s right folks – soon to be discontinued money supply data ALREADY showing annualized growth rates in excess of 28% – and the Fed would have us all believe that this is a non-event.”
The staff at Free Market News tried to imply a direct relationship between the decision to not report M3 money supply figures and this new print move. “The M3 was the amount of cash the government printed to put into circulation, propping-up the U.S. economy.” This is not true, specifically. M1 is the sum of currency that is held outside banks, travelers checks, checking accounts (but not demand deposits), minus the amount of money in the Federal Reserve float. M2 is sum of M1 plus savings deposits (this would include money market accounts from which no checks can be written), small denomination time deposits (less than $100,000), and retirement accounts. M3 (discontinued) is M1 plus M2 plus the large time deposits (more than $100,000), Eurodollar deposits, dollars held at foreign offices of U.S. banks, and institutional money market funds. Cash eventually shows up in all of these, but the significance of removing M3 has more to do with hiding the numbers of dollars outside the US where most inflation goes so as to deny currency traders a key piece of the data which helps evaluate the dollar versus other currencies. They have alternates, of course, but losing M3 was important. Congressman Ron Paul (R-TX) has introduced legislation to require the Fed to resume reporting the M3 statistic. Urge your Congressmen to support The Sunshine in Monetary Policy Act.