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US money supply plunges at 1930s pace as Obama eyes fresh stimulus

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posted on May, 27 2010 @ 08:52 AM
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US money supply plunges at 1930s pace as Obama eyes fresh stimulus




The M3 figures - which include broad range of bank accounts and are tracked by British and European monetarists for warning signals about the direction of the US economy a year or so in advance - began shrinking last summer. The pace has since quickened. The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc. The assets of insitutional money market funds fell at a 37pc rate, the sharpest drop ever.


article

Here comes that deflation. The average American is in debt up to their eyeballs, a shrinking money supply is going to be a bullet (another bullet) into the heart of the economy.

Of course the government has the answer..


The US authorities have an entirely different explanation for the failure of stimulus measures to gain full traction. They are opting instead for yet further doses of Keynesian spending, despite warnings from the IMF that the gross public debt of the US will reach 97pc of GDP next year and 110pc by 2015. Larry Summers, President Barack Obama’s top economic adviser, has asked Congress to "grit its teeth" and approve a fresh fiscal boost of $200bn to keep growth on track. "We are nearly 8m jobs short of normal employment. For millions of Americans the economic emergency grinds on," he said.


The U.S. can go into the next depression via deflation and huge amounts of consumer debt or the government can do the Greek thing.

Unlike Greece, the Fed can print money. Every liability the U.S. has will now be solved by the printing press. I guess the "full faith and credit" of the U.S. government lies in its ability to cut down trees to print more dollars.

I guess the choice is clear, a painful economic depression that will eventually clean the rot and corruption from the economy and government, or we can PRINT MOAR DOLLARS and protect those that are causing this mess while postponing the inevitable.




posted on May, 27 2010 @ 10:00 AM
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reply to post by wutone
 


This is highly important news. In fact, it's probably THEE most important news on ATS right now.

Just last quarter we were debating the power of coming inflation, the inevitable rising prices, increased monetary spending and so on .. ALL indicators depicted inflation was finally coming. Some inflation, typically under 5% is considered "growth" in some respects, it was expected that we were going to face much worse.

THIS news however indicates that the money supply has yet again decreased, and not only that, but at alarming rates... I would say that the majority of the money that was lost came directly from equity markets, billions have been wiped out since the Dow has turned south.

But at the same time I'd say that banks are continuously dealing with liquidity problems.

Americans in debt doesn't decrease the monetary supply (it's wealth transfer, dollar goes from point A to point B) .. in order for the monetary supply to slow or decline, wealth needs to vanish, which can only indicate troubles in the equity markets, or credit markets, or both. Decreased Capital and corporate liquidity will result in further layoffs, reduction of spending, all that bad stuff.



posted on May, 27 2010 @ 10:16 AM
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The supply plunge doesn't show up on FRED reports.

M1 money supply
research.stlouisfed.org...

M2 money supply
research.stlouisfed.org...

M3 money supply was discontinued in 2006



posted on May, 27 2010 @ 10:22 AM
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reply to post by Dbriefed
 


Interesting.. It's the Telegraph, not like the ticker sites or anything. Weirdness.

Ah wait.. found it:


Mr Bernanke no longer pays attention to the M3 data. The bank stopped publishing the data five years ago, deeming it too erratic to be of much use.


From the Source in the OP.

The Data is not published anymore... but .. it's still there. I mean, why would we publish and show the people statistics that show the economy in a bad light????



posted on May, 27 2010 @ 10:26 AM
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reply to post by Rockpuck
 



** While the Fed does not publish M3, it still publishes the underlying components. The indicator is reconstructed accurately for clients by Dr John Williams. See it here.


The "Here" send you to:

www.shadowstats.com...

LMFAO .. The Telegraph, a reputable European news outlet, sourced Shadowstats..

Am I dreaming?

Edit to add pretty graphs (except I dunno how to insert pictures)

www.shadowstats.com...

[edit on 5/27/2010 by Rockpuck]



posted on May, 27 2010 @ 10:33 AM
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Originally posted by Rockpuck
Am I dreaming?


Yes.

Now what?



posted on May, 27 2010 @ 10:36 AM
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reply to post by wutone
 


It is absolutley vital that a fresh stimulus package is passed through Congress. Without one the U.S. and world economy will plunge in to a deeper recession.

The deficit has to be, instead of being reduced which is what is being argued by the mainstream political leaders and economists who got us in to this mess, increased to avoid a bigger downturn than that of 2008.

The deficit can be dealt with when the U.S. is actually out of recession and starting to grow again.

[edit on 27-5-2010 by Peruvianmonk]



posted on May, 27 2010 @ 10:44 AM
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reply to post by Peruvianmonk
 


Ah we have a Keynesian!

Unfortuneantly.. it don't work like that. Deficits can create a minor bump up for the economy in a recession, however depending on the severity of a recession, the effects of Government spending is diminished per the % of the economy in decline.

Think of the US Economy as a canoe .. our canoe has a small hole in the bottom, the Us Government's deficit is a big ol' bucket, scooping water out of the canoe. That's in a minor recession.

In a depression or even a severe recession, (we are in a depression, regardless of what the MSM will tell you) .. the canoe has several large holes and while dumping our big ol bucket every few seconds might abate the water for just a small amount of time, eventually we tire out and sink.

In a Depression the fundementals of the economy must be reset, this cannot be done by blanket spending alone, because the economy is missing a key element and that is wealth, whereas the creation of funds to support the spending habits of the pre existant economy prior to the collapse is not wealth, it is the devaluation of the currency to dilute the total sum of debt in efforts to create liquidity, ie, buying power.

The Keynesian flaw is that it circles around perpetual growth, that a down turn, recession, depression should be avoided at all cost, even it means possibly bankrupting our selves. A full blown depression would not have been that severe in the US, so far all we have been successful at doing is inflating the deficit, dilute the Dollar, and keep the rich .. rich. We are still short 9-10 million jobs from where we should be had there been no depression.. considering 4 trillion dollars that has been officially spent on these bailouts would pay the US Workforce their salary for about 10 years, that's not saying much.



posted on May, 27 2010 @ 10:46 AM
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If the article is correct, then yea THE FED (not government) should be increasing money supply. If there is a low money supply it leads to recession. Basic economy fact. Government really should not be doing the fed's job though because the fed most likely knows more of what is going on.



posted on May, 27 2010 @ 11:15 AM
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This is interesting and confirms my suspicions.

1. It has become apparent to me that the contraction in our credit aggregates cannot be slowed or reversed by ANY amount of printing. Which means deflationary pressures are coming(I'm actually happy about this because I have a lot of cash, no debt, and a store of silver).

2. My fear of out of control inflation, however, stems from the fact that once the EU collapses along side the US, our creditors are going to want their money, and we may wind up getting flooded in a sea of our own cash should the rest of the world start calling in our debts.

Or we will just default and possibly go to war.

[edit on 27-5-2010 by projectvxn]



posted on May, 27 2010 @ 11:41 AM
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Personally I would like to have seen at least one Gov along the way go down the Wealth creation route.. but how do you convince your creditors that it's cool to compete against them and from their perspective steal some of their wealth..

We seem to be circling the drain on that one issue.

It seems to my untrained and simplistic eyes that without wealth creation we are stuffed and with wealth creation we are stuffed, while the establishment is between a rock and hard place with only a few options available to handle the mess we are in.

Until I see some new tech that brings enough change to create enough revenue streams to make a dent in this debt I can only conclude that conflict is the only outcome.

Either via internal protests at the Tax hikes, service cuts as part of any repayment plan, or some external conflict involving a handy scapegoat, that allows the establishment all the emergency legislative tools that come with large conflicts.

Personally I can not see the establishement allowing the internal machinations of their gov to be undermined and indeed given the threats in response to the bailouts, their heads literal appear to be on the line, so I can only conclude an external scapegoat will be found (there appear to be a few already set up for any fall)

If you look behind the Falklands issue (threats of war) etc, your see the Establishment propping up the Argentine economy, even while the threats of conflict flew around a British bank was appointed to manage the soverign debt issues in Argentina..

They really do not need another Greece running rampant in South America.

That approach clearly demonstrates (to me atleast) the desperation that is running behind the scenes at the moment and I have to wonder how many more bailouts, and how many more last throws of the dice those in power have left before the true extent of the issues become visible for all to see.



posted on May, 27 2010 @ 01:21 PM
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Originally posted by Peruvianmonk
It is absolutley vital that a fresh stimulus package is passed through Congress. Without one the U.S. and world economy will plunge in to a deeper recession.



The problem with that is that those who caused economic problems in the first place will retain their position.

A fresh stimulus is just a bailout. Sure its just printed money and more money can be printed until infinity.

The real problem is that trust an faith are very important in this economy. There will be a point when people lose total faith in the government, who keeps maintaining economic corruption via bailouts.

Look who gets the bailouts, it is either the failures or the guys who had a big hand in this economic mess. Look at the Wall Streeters, Fannie and Freddie, GM, Greece, these people should BE CLEANED OUT OF THE SYSTEM and they SHOULD ROT AWAY instead of being preserved. They are FAILURES who happen to have the ear of the government.

But these bailouts are protecting the biggest failure of them all, the true rot in our system. The bailouts are protecting the Fed. Our banking system is unsustainable.

The moment there is deflation, and allowed to take its course, many institutions that have been driving Americans into the pits of debt and economic malaise will be destroyed. The Fed, the top of that pyramid is going to have to fall and people will hate debt based fiat currency for generations.

Sure it is a big change and there will be societal pain, but it is going to happen anyways only a lot more painful if time goes on. The point of recessions and depressions is to clean out the excess and rot from the economy. The point of bailouts is to preserve that excess and rot. Why is it that unions , Wall Street execs, and government workers get the big bucks and benefits while the average American gets hosed with taxes or wallows in unemployment?

The choice is simple. Bailout the rot, or purge the system.



posted on May, 27 2010 @ 07:20 PM
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reply to post by wutone
 


Yes but by stimulus i do not mean another bailout for massive incompetent corporations.

I am talking about direct job creation by the State on infrastructure projects, something the U.S. desperately needs anyway.

A bailout for those underwater on their mortgages. Grants for Solar and Wind energy installations on private homes.



posted on May, 27 2010 @ 07:42 PM
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Duplicate post, created when editing?



[edit on 27-5-2010 by sligtlyskeptical]



posted on May, 27 2010 @ 07:42 PM
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The real problem is the fact that we don't simply print the money. We have to lend it into circulation. The only way out of this is a huge public works program paid for by dollars that are printed by the treasury leaving the Federal Reserve out of it. Let's put everyone that needs work, to work, and at the same time solve the M3 problem.

Inflation? We have a long ways to go before this would result in any inflation. If we do enough of it we just may prevent major deflation. I think we could do it indefinitely without inflation as long as the work being done was actually productive and leverage in the financial system was kept to a minimum.

If the big money conservatives don't want it to happen then you better start coming up with many millions of decent paying jobs before saying squat.



[edit on 27-5-2010 by sligtlyskeptical]



posted on May, 27 2010 @ 08:38 PM
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reply to post by Peruvianmonk
 




I am talking about direct job creation by the State on infrastructure projects, something the U.S. desperately needs anyway.


Oh but this failed miserably as well. Because of the massive decline in tax revenue most infrastructure plans were sidelined by the States, the stimulus money has given enough financial lubrication to the states that old projects were restarted, and some new projects began. However comparing the amount of new construction to pre-depression levels, the amount of workforce being employed by the construction industry has actually fallen .. because instead of hiring new construction guys, the same sized teams, often with the same people, are used to complete or start new projects.

ALSO .. Infrastructure is not wealth generating.. it's a massive expenditure.. if you are going to pump hundreds of billions of dollars into a stimulating aspect of the economy, it had damn well better be an aspect that, once funding is gone, can be self sufficient at wealth generation. Had the Government provided billions in start up grants, factory investment, universities and so on .. that would be one thing.. an extra lane on a highway .. that only gives us a deficit and a headache while stuck in traffic.



A bailout for those underwater on their mortgages. Grants for Solar and Wind energy installations on private homes.


Being underwater on a Mortgage does not equate to financial hardships, only if you're trying to sell your home. But as it is, why only those underwater, why not everyone? How about another $600 check like under Bush, because that stimulated the economy .. so well.


Solar and Wind on houses is impractical and idiotic.. Green energy destroys jobs, it does not create them. Not to mention spending $20,000 on solar panels to save $100 a month is .... retarded. Sorry, no other word for it.



posted on May, 27 2010 @ 08:55 PM
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reply to post by Peruvianmonk
 


Why make it so complex?

Wouldn't it be much easier to just say "We are canceling federal income tax and payroll taxes for the next 2-3 years. Companies will be required to give the payroll taxes to the employee instead."

Done, and quite simple really.



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