Re: Re[2]: [RT] Inflation, RealTraders Email List Archive

Ira, you didn't mention South American loans in the 70's....

Penn Central or Penn Square.....

I think Volker once said, "Bankers are idiots" in Fortune magazine....

Seems Bankers never learn.....

We always come out of though, but not wiser, just with the seeds of the next bubble....

In a message dated 1/15/2008 2:15:26 PM Central Standard Time, mr.ira@xxxxxxxxxxxxx writes:

Look at it this way. The government buys back its paper to increase the money supply and sells its paper to reduce the money supply and finally it prints money when it needs it. There are certain facts about the markets. That there is no government action that can change the direction of market forces for more than a day or two. There is no government action that can change the direction of currency valuation for more than a day or two. The basic economic facts remain the same as they were a year ago, but not acknowledged. The government held that inflation last year was at 2+% and therefore at the end of the year all subsidy increases based upon inflation were held at that rate. Now they tell us that the actual rate was 6% by their measure. The cost of living actually rose by about 16+%.

There is no amount of money that the government can pump into this economy that will solve its current problems. It will take time to cure. You are seeing the next step in the mortgage debacle and it won't be over for another year as far as I can see. Inflation will continue until the government decides to start raising interest rates. After a 100 years the cry from the pits "beans in the teens" has come to pass.

There is a credit crunch as far as doing business is concerned and adding money supply wouldn't help that although it might help the stock markets short term. The banks and investment banks that were involved with the bad Russian loans, the bad South American loans and now the bad mortgage loans need capital to survive. They are getting that capital from the oil rich states of the middle east and the exporters of the far east. America is being sold at bargain basement prices and there is nothing that we can do about it right now. You lose your company billions and walk away with a billion dollar severance package. That seems to be the American way now. the bigger the screw-up the greater the payout.

Sorry that I got carried away, so I had better stop here. Just one man's opinion. Ira.

Ira
www.delta100.com

----- Original Message -----

From: Code 2

To: realtraders@xxxxxxxxxxxxxxx

Sent: Tuesday, January 15, 2008 8:36 AM

Subject: Re[2]: [RT] Inflation

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