[falser]

Quoting this article:

$this->bbcode_second_pass_quote('', 'T')his is what I gleaned from the speech last night: Bernanke tells a story, that if an alchemist invented a way to make gold in unlimited quantities, then released this news to the world and said he was going to start making and selling unlimited amounts of gold, the price drop immediately, before the Alchemist made or sold a single ounce. He goes on to compare the Fed to that alchemist. He talks about the printing press, then says, "By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services."

Then it struck me - this elimination of M3 in March is the credible threat.. It's a bluff. First they juice M3 like it is the end of the world (or 1999), and then they turn the lights out on the statistics. Since we're all in the dark, the only thing we can assume is that the Fed is monetizing debt like there is no tomorrow. But they really don't want to do that -- it is not good for their balance sheet -- so instead they engineer this bluff. Everyone believes it, and they (we) act accordingly, bidding up stocks and gold.

[dbarberic]

For the life of me, I can't imagine how a bluff on removing M3 would be of any value. The author proposes that it was done to reduce the value of the dollar relative to other currencies, however, why even bother bluffing and why not just print the money. Printing the money is way more valuable to a government than bluffing that your going to print more money. When you print you get to monitize the debt, thus lowering it and it is an effective hidden tax on the citizens. Why lie about it and not just do it.

The author is selling, but I'm not buying.

For all practical purposes, the US is in a recession. The juicing of M3 the last few months is to keep things moving along and asset prices from falling (stocks/houses).

On a somewhat related topic; I was surfing around on Wikipedia and found a whole page on Hyperinflation.
http://en.wikipedia.org/wiki/Hyperinflation

$this->bbcode_second_pass_quote('', 'G')overnments will often try to disguise the true rate of inflation through a variety of techniques. These can include the following:
-Outright lying as to official statistics such as money supply, inflation or reserves.
-Suppression of publication of money supply statistics, or inflation indices.
-Price and wage controls.
-Forced savings schemes, designed to suck up excess liquidity. These savings schemes may be described as pensions schemes, emergency funds, war funds, or similar.
-Adjusting the components of the Consumer Price Index, to remove those items whose prices are rising the fastest.

[Kingcoal]

$this->bbcode_second_pass_quote('falser', 'Q')uoting this article:

$this->bbcode_second_pass_quote('', 'T')his is what I gleaned from the speech last night: Bernanke tells a story, that if an alchemist invented a way to make gold in unlimited quantities, then released this news to the world and said he was going to start making and selling unlimited amounts of gold, the price drop immediately, before the Alchemist made or sold a single ounce. He goes on to compare the Fed to that alchemist. He talks about the printing press, then says, "By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services."

Then it struck me - this elimination of M3 in March is the credible threat.. It's a bluff. First they juice M3 like it is the end of the world (or 1999), and then they turn the lights out on the statistics. Since we're all in the dark, the only thing we can assume is that the Fed is monetizing debt like there is no tomorrow. But they really don't want to do that -- it is not good for their balance sheet -- so instead they engineer this bluff. Everyone believes it, and they (we) act accordingly, bidding up stocks and gold.

[Pfish]

Is there a web site to track M3? Thanks!

[dbarberic]

$this->bbcode_second_pass_quote('Pfish', 'I')s there a web site to track M3? Thanks!

[strider3700]

sort of an aside but how does the governement create new money? Two parts to the question. Do they literally print new dollars to cover newly created money or is lots of it purely electronic in nature these days? And what do they do with it when it's made? Do they just call up someone they owe money to and say here's that $100,000,000 we owe you do you want it in $100's or $20's or do they somehow distribute the money into banks and if so who decides who gets what and how?

I just was thinking that creating money isn't good enough you have to get it into the system and then either be very secretive and favour someone, find a way to spread it around or simply pay your bills with it but why anyone in their right mind would continue accepting it in the long run eludes me.

[Doly]

$this->bbcode_second_pass_quote('strider3700', 's')ort of an aside but how does the governement create new money?