A bunch of government gobbledy-gook
By The Mogambo Guru
Total Fed Credit was down by US$4.1 billion last week. This is the magical
stuff from which bank credit is made, which becomes money when someone borrows
it, and no matter what happens I am going to be scared and/or outraged. So I
was surprised that not much new money was created, especially since all I hear
is how there is some big "liquidity crisis" because nobody has any money, and
how everybody needs so much money that the Fed is now bailing out investment
banks because they don't have any money, and how one of the stupid kids has to
go to the dentist
and I don't have any money except for the money that I am going to need to play
golf this week, and I need that.
The reason that I am surprised is that there is plenty of money being made, as
the latest estimate of M3 money supply by John Williams at shadowstats.com is
that the damnable Federal Reserve is creating and expanding the money supply at
a rate of 16.9% a year, and beyond that it was "the highest monthly growth rate
ever seen for the M3 series (the Federal Reserve's calculation of the broad
money measure dates back to January 1959)."
What makes this so surprising is that "The prior record monthly annual growth
for M3 was 16.4% in June 1971, and the inflation from excessive money creation
at the time was a key factor pressuring the greenback, leading up to president
[Richard] Nixon's closing the gold window and imposing wage and price controls
in August of that year."
Not surprisingly, then, he says, "The current surge in broad money supply
growth has equally ominous implications for monetary inflation and dollar
pressures during the next nine to 12 months, well into 2009."
And this anticipated inflation is already here, as the annualized, "SGS
Alternate Consumer Inflation" for February was 11.6%, and the annualized
inflation for the previous three months were also the same horrific 11.7%
(November), 11.7% (December) and 11.8% (January).
Of course, with all of this data, classical methodology and lots of smarts,
which is contrary to The Mogambo, who has none of any of the above, it is but
child's play for him to give us Gross Domestic Product (the total of all the
goods and services produced in a year) and he finds that "with many of the
methodological gimmicks of recent decades removed", the most recent estimate is
"a decline of roughly 2.3% versus the official, slowing year-to-year gain of
2.5%." Yikes! A crappy gain is actually a terrifying economic contraction!
And for those who write to me with requests ("Drop dead!") to no avail, I am
happy to report that Mr Williams kindly does respond to requests from
subscribers, and is now introducing the SGS-Alternate Unemployment Rate, which
sounds like a bunch of government gobbledy-gook, which it actually is, as it
takes the Labor Department's measure of unemployment known as U6, which he says
was at 8.9% as of February, and "adjusts" it by adding back "an estimate of the
millions of discouraged workers defined away during the Clinton administration
- those who had been 'discouraged' for more than one year."
At this point I was becoming pretty saturated with numbers that I forget as
soon as I hear them, and as usual my brain is reeling at the half-remembered
deluge of facts and figures, and I am starting to get angry that my Valuable
Mogambo Time (VMT) has been wasted by telling me all of this methodology stuff
when I could be out, right now, eating a couple of tacos and maybe leafing
through this month's issue of Hot Nasty Naked Ladies magazine and making lewd
yet appreciative comments.
But all of that was instantly forgotten when he said that the result of his
work is that the first SGS-Alternate estimate of unemployment is a horrifying
12.8% for February! Suddenly, I am not hungry anymore. 12.8% unemployment!
Roughly half the rate at the depths of the Great Depression!
Fortunately, I still have something to read that will take my mind off of it.
Ahhh! And a taco might taste good right about now, too!
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
(Republished with permission from
The Daily Reckoning. Copyright 2008, The Daily Reckoning.)
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