M3 money supply contracting at 1929-1933 levels

jimpeel

Well-Known Member
It seems that those who ignore history are doomed to repeat it. Let's all hope the Keynesians wake up before they destroy what's left of this country.

You will know we are in big trouble at the point they issue a new denomination of currency.

SOURCE

US money supply plunges at 1930s pace as Obama eyes fresh stimulus
The M3 money supply in the United States is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history.

By Ambrose Evans-Pritchard
Published: 9:40PM BST 26 May 2010

he 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.

"It’s frightening," said Professor Tim Congdon from International Monetary Research. "The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly," he said.

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.

David Rosenberg from Gluskin Sheff said the White House appears to have reversed course just weeks after Mr Obama vowed to rein in a budget deficit of $1.5 trillion (9.4pc of GDP) this year and set up a commission to target cuts. "You truly cannot make this stuff up. The US governnment is freaked out about the prospect of a double-dip," he said.

The White House request is a tacit admission that the economy is already losing thrust and may stall later this year as stimulus from the original $800bn package starts to fade.

Recent data have been mixed. Durable goods orders jumped 2.9pc in April but house prices have been falling for several months and mortgage applications have dropped to a 13-year low. The ECRI leading index of US economic activity has been sliding continuously since its peak in October, suffering the steepest one-week drop ever recorded in mid-May.

Mr Summers acknowledged in a speech this week that the eurozone crisis had shone a spotlight on the dangers of spiralling public debt. He said deficit spending delays the day of reckoning and leaves the US at the mercy of foreign creditors. Ultimately, "failure begets failure" in fiscal policy as the logic of compound interest does its worst.

However, Mr Summers said it would be "pennywise and pound foolish" to skimp just as the kindling wood of recovery starts to catch fire. He said fiscal policy comes into its own at at time when the economy "faces a liquidity trap" and the Fed is constrained by zero interest rates.

Mr Congdon said the Obama policy risks repeating the strategic errors of Japan, which pushed debt to dangerously high levels with one fiscal boost after another during its Lost Decade, instead of resorting to full-blown "Friedmanite" monetary stimulus.

"Fiscal policy does not work. The US has just tried the biggest fiscal experiment in history and it has failed. What matters is the quantity of money and in extremis that can be increased easily by quantititave easing. If the Fed doesn’t act, a double-dip recession is a virtual certainty," he said.

Mr Congdon said the dominant voices in US policy-making - Nobel laureates Paul Krugman and Joe Stiglitz, as well as Mr Summers and Fed chair Ben Bernanke - are all Keynesians of different stripes who "despise traditional monetary theory and have a religious aversion to any mention of the quantity of money". The great opus by Milton Friedman and Anna Schwartz - The Monetary History of the United States - has been left to gather dust.

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.

This may have been a serious error since double-digit growth of M3 during the US housing bubble gave clear warnings that the boom was out of control. The sudden slowdown in M3 in early to mid-2008 - just as the Fed talked of raising rates - gave a second warning that the economy was about to go into a nosedive.

Mr Bernanke built his academic reputation on the study of the credit mechanism. This model offers a radically different theory for how the financial system works. While so-called "creditism" has become the new orthodoxy in US central banking, it has not yet been tested over time and may yet prove to be a misadventure.

Paul Ashworth at Capital Economics said the decline in M3 is worrying and points to a growing risk of deflation. "Core inflation is already the lowest since 1966, so we don’t have much margin for error here. Deflation becomes a threat if it goes on long enough to become entrenched," he said.

However, Mr Ashworth warned against a mechanical interpretation of money supply figures. "You could argue that M3 has been going down because people have been taking their money out of accounts to buy stocks, property and other assets," he said.

Events may soon tell us whether this is benign or malign. It is certainly remarkable.

** 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.
 
press the reset button too 1929-1933 levels

Our studies have shown that this horrible force is so dangerous to society at large that laws are being drawn up at this very moment to stop it forever! Cruel and inhuman punishments are being carefully described in tiny paragraphs so they won't conflict with the Constitution (which, itself, is being modified in order to accommodate THE FUTURE).

I bring you now a special presentation to show what can happen to you if you choose a career in MUSIC . . . The WHITE ZONE is for loading and unloading only . . . if you have to load or unload, go to the WHITE ZONE . . . you'll love it . . . it's a way of life . . .


The Central Scrutinizer + Joe's Garage - Frank Zappa
 
are you saying that a keynesian approach is specifically to blame here (if so, please explain) or are you just using that work as a label for "people that speak fancy econ talk."

Keynesian economics depends on the government to step in and infuse cash into the economy. This shows a false recovery as the money supply increases but the buying power decreases similarly. Every dollar printed decreases the buying power of the dollars already in circulation.

The Keynesians in power are doing just that. They are monetizing the debt which is the most dangerous aspect of Keynesian philosophy. Obama recently monetized debt on nearly a trillion dollars.

Watch gold. Gold doesn't change its price. It always stays stable. When they say that gold is going up what they are truly saying is that the number of inflated dollars required to buy that ounce of gold has increased.

In 1920 an ounce of gold would buy you a very fine suit of clothes. Today, that same ounce of gold will still buy you a very fine suit of clothes.

The purchasing power of the gold hasn't decreased. Only the number of equivalent dollars has changed. The $32 cash price of the suit of clothes is now a $1,200+ cash price of the suit of clothes.

Keynesian economics discounts the private sector as the cure for a recession/depression and places the entire onus on an overarching government and whatever plans they may come up with to make it appear their programs are working.

Keynes was an idiot and those who follow his failed philosophy are also idiots. The entire philosophy is built on smoke and mirrors.

If you are thinking of bringing up FDR and his programs history has shown that those programs extended the depression for ten years. The war was just a plus that fell into his lap.
 
there's some things i'm willing to respond to carefully, and there's some things that i'm not. in this case i'm perfectly content to simply be amused that jimpeel has, apparently, a clearer understanding of economics than john maynard. it would be great if you commented on every useless or dismissive post on this board the way you comment on mine. that would indicate a true interest in elevating the content of this board, rather than your current mode, which seems to indicate that you have a some weird thing for me - possibly a gay crush...?
:lol2:
 
This ain't yer Granddaddies' depression.

Winkyl said:
And yet another dismissive post.

The solution is clear although it will not be implemented.
The agenda is to advance socialism, which will be successful.
A mixed economy doesn't stay mixed for long.
I rue the day the pendulum swings the other way
as it must.

Can the west buck the rule of history and make these transitions without bloodshed?
 
Re: This ain't yer Granddaddies' depression.

The solution is clear although it will not be implemented.
The agenda is to advance socialism, which will be successful.
A mixed economy doesn't stay mixed for long.
I rue the day the pendulum swings the other way
as it must.

Can the west buck the rule of history and make these transitions without bloodshed?

um, but you do realize that every successful economy today IS A MIXED ECONOMY, right?
 
1929-1933? You ain't seen nuthin' yet baby!

well well well now
they are indeed all ‘mixed’ but to different degrees
I seriously doubt you and I could ever agree on even one point but
here goes an exercise in futility.

Which of the worlds economies are the most quote unquote ‘successful’?

The command and control or those that tend more towards a laissez-faire situation.
(OK Ok I know that NO WHERE on the flippen earth right now is there anything even close to a true laissez-faire economy, that why I typed tend more towards).

Jebuz talkin’ to these Ph.D’s is SO laborious.

If you picked Cuba and North Korea then we can’t allow you on:
Are you smarter than a fifth grader?

C’Mon Is a mulatto community organizer from Chicago and his Czars
far better able to direct the economy than that good old invisible hand of the market?

Not to worry though, for the foreseeable future America will become more and more like the old Soviet Union and less like what it was founded to be.

The baby boomers will all croak off and there will be no one left to recall
what life was life not having the government up your ass everyday.
 
It's OK we are from the government and we are here to help

Better yet tell me what measures should be instituted
to change the direction of the economy.

If you were 'king for a day' how would you direct things?

I know what I’d like to see.
 
japan did really well for a long time with massive amounts of government involvement in industry.

germany is a huge and very powerful economy. you or gonz would declare the krauts commie a million times over.

china seems to be doing okay these days. hmm, wonder what the deal is there?

an acephalous economic system is fine when everybody is a self-supporting dirt farmer and shit's pretty easy to understand. then things get complicated. don't like it? go live like ted kazynski (sp?).

"fucking troglodytes."
 
Feudalism has worked every time it has been tried.

No comparison to what America used to be?

ok we get it, the government must direct the citizens every action
It worked great for the serfs too.
Silly socialist.
 
there's some things i'm willing to respond to carefully, and there's some things that i'm not. in this case i'm perfectly content to simply be amused that jimpeel has, apparently, a clearer understanding of economics than john maynard. it would be great if you commented on every useless or dismissive post on this board the way you comment on mine. that would indicate a true interest in elevating the content of this board, rather than your current mode, which seems to indicate that you have a some weird thing for me - possibly a gay crush...?
:lol2:


Another failure of a post. Perhaps you should study something before you answer...
 
Re: Feudalism has worked every time it has been tried.

No comparison to what America used to be?

ok we get it, the government must direct the citizens every action
It worked great for the serfs too.
Silly socialist.

please refer back to my "when everybody was a dirt farmer" comment in re: what 'merica used to be.

there's a big difference between government interference and government support. you and gonz seem to think interference is endemic. i don't. i do appreciate the sluggishness of bureaucracy, but it does not take government to exhibit such behaviors. in fact there are some organizational dynamics that go on at private firms that are at least as massively wasteful as the shit we see in government.

also, please refer back my mentions of what is rational self interest to a businessperson in the here and now vs. what will make a viable economy long term. capitalism is by far the most efficient system of redistribution we've come up with so far, but it is absolutely irrational when it comes to longer term planning.

take the brand managers i talk to fairly often. they've got shitty, outdated products with brands that make you think of the worst of the 1970s, and all they want to do is figure how to prop the brand up and sell more of their shitty product. that's their job. that's what they do. they get promoted if asscan brand sells more. so they wrap it in moronic, oversaturated colors and make it pickle-lime-chipotle flavor to "contemporize" it but long term, the bitch is going down because the youth have moved to much better things. someone needs to fire the brand manager and sell off or just kill the shitcan brand, but they just can't separate themselves from it because, hey, this month, we sold 80 million dollars of the shit. so they cling to it because of their immediate interest in the cash flow. just like we're still stuck on an extractive, oil-fueled economy. it's rational in the immediate term, but ridiculously superdumb longer term.

oh, and gato, just do us both a favor and put me on ignore, and cease commenting on my posts. really. okthxbai.
 
Algores carbon footprint notwithstanding.

Your philosophy, your worldview is so diametrically opposed to mine
that I honestly don’t’ know where to start!

Who was to blame for GM’s decline?
Management producing shitty Chevy’s
or the labor Unions who made the company unprofitable?

Guess it will be fine now as they have the endless resources of
the Federal government to fall back on and the Union is in charge of the company?

Doesn’t really matter cuz you buy Japanese anyway right?

You do know how silly you guys sound when you make statements such as:
“just like we're still stuck on an extractive, oil-fueled economy.”

How long is long term?

Barring the advent of electrical power generation from fusion reactors
there are only three useful primary energy sources available to human kind.
Sunlight
The power stored from the sun in the form of fossil fuels and
the bits of stuff in the earth’s crust generated by stellar nucleosynthesis
in the form of Uranium.

I guess we should strive to find ways to harness the 1.366 kW/m² of power
falling on the ground during the day and build a slew of safe efficient fission reactors
to hold us over until we determine how to construct fusion reactors.

In the meantime there is more than enough gas, oil and coal left to keep the lights on
for a hellava long time.

In all of this I really don’t see much of role for the idiots in Washington other
than to hinder progress.

I’m sure glad the government stepped in in 08 and saved us from ourselves
I’m sure everything will begin to turn around when we throw the bums out
and replace them with another set of bums in 2012, right?
==============================================
This useless, meandering rant was brought to you by Winky
proud member of the bumper sticker Crusaders of America.
 
Ya forgot wind-turbines and Quebec's favourite..hydro-electric.

Coal gives you more than 1/2 of your electricity..and won't run out anytime soon. It won't fuel cars though. Natural gas and nuclear are about equal...the rest, far behind.
lessons_generationPie.gif


Increasing alternative power-sources for electricity wouldn't hurt. It would certainly reduce air pollution.
 
Back
Top