I would appreciate if Tim, Ira, Jim and the others here could shed
some
light on the Fed's liquidity auctions -- most recently $30
billion in funds
at below-market interest rates.
It sounds like the Fed's traditional open
market operations are not
working like they used to to add liquidity. The
latest chart of M3
I've seen seems to show the year-over-year percentage
change in money
supply peaked in late 2007 and turning down
slightly.
The more the people in power tell us that the credit markets
are fine
and the crisis is abating, the more concerned I get.
From:
Timothy Morge <timothymorge@sbcglobal.net>
To:
realtraders@yahoogroups.com
Date:
Thursday, January 3, 2008, 2:01:11 PM
Subject: [RT] Inflation
My point
here would be that the self proclaimed
savior, Greenspan, realized some time
ago that real
inflation was driven by the expansion of the
broadest
measure of the money supply [m3] and so he
conveniently had the
Fed officially stop publishing
the aggregate M3 numbers. Why? Because then
when the
'massaged' inflation numbers [You would die laughing
if you saw
exactly how the BLS and Treasury officials
actually 'seasonally adjust' these
and all economic
numbers, by the way] come out, they would no longer
have
to explain how M3 could be growing at 8 pct and
their 'officially massaged'
CPI number showed 2 pct
inflation.
But never fear! By law, regional
Federal Reserve Banks
MUST report transactions, money supply growth by
all
measures and several other very useful statistics. So
if you actually
take the time to visit ALL the
regional Federal Reserve Bank web sites one by
one,
record the actual M3 numbers monthly and then do the
simple math, you
too can have the real money supply
number and will have a very good feeling
for what
domestic inflation really is and what is likely to be
6-18 months
from now.
I do not buy the 'domestic inflation' has been
lowered
because of globalization and productivity. I am a pure
monetarist
and in my opinion, price is all that
matters. If M3 is growing at 17 pct, I
don't care
about those explanations--they are fluff
mis-information
excuses put out by the Fed and the
Treasury to help explain their massaged
numbers.
But as I said in an earlier post, this MY opinion. NO
ONE
should take anything I say as the 'truth.'
Instead, look at all of these
statements made by
everyone, especially the government and then do
your
own reading and research. Then make your own decision
about what
makes sense and what seems like hooey.
I can tell you...I have a wife and
a 7 year old and a
9 year old and our grocery bills have more than
doubled
in 2 1/2 years where I live. And we do not
live an lavish lifestyle. And gas
went from $1.25 to
$3.00 on a good. And My insurance costs have
nearly
doubled over the past 3 years. To me, productivity
and
globalization don't change the fact that these numbers
look like I am
facing 20+ pct inflation on an annual
basis already. And just wait until our
current Fed
Chairman starts raising rates...
Tim
Morge
www.marketgeometry.com
--- Jim White <jwhite43@xxxxxxxxxnet>
wrote:
> Years ago, after the rapid rise in inflation and
>
interest rates put my development company out of
> business, I developed
an equation to forecast
> interest rates based on the rate of increase
in
> money supply and the rate of increase in GNP.
> I will have to
review the formula but I believe it
> was
> Inflation rate = Rate
of money supply growth - (rate
> of GNP growth + 3%). The effects of
surplus money
> supply are felt as price increases with a lag of
>
about 6 months.
> Today's conditions are somewhat different due to
the
> globalization of business and the rapid rise in
> productivity
due to technology and have resulted in
> a slowing of domestic inflation.
Never the less, I
> believe there will be a reckoning and a return
to
> more sustainable conditions but this time it will be
> world
wide.
> Jim White
> Pivot Research & Trading Co.
>
PivotTrader.com