M3 Decline Equals Inevitable Dollar Collapse

June 30, 2010 Inflation, Politics, Predictions No Comments

If you keep your eye on the M3 numbers, you will see that the M3 decline equals an inevitable dollar collapse. The Fed in collusion with the government is hell bent on another round of “quantitative easing” which should open the door to hyper-inflation. Get prepared because things are going to get nasty as the M3 decline equals an inevitable dollar collapse.

How do we really know what is going on with the U.S. economy? Do we listen to the hacks who call themselves reporters, or do we listen to the “pap” that is spewed by the Obamunists working in the only sector of the economy that is expanding: the government. The answer is really quite simple. You listen to neither.

There is hardly a “reporter” out there that has any interest in finding out the truth of any story. They read what is handed to them, all the while assuming that those in charge know what they are doing. There are few, if any, investigative reporters left in the print or television media. The internet is where you can find them, and that is probably why the Community Organizer In Chief is seeking legislation that will allow him to shut down the internet without Congressional approval.

Did I Do That Obama2 286x300 M3 Decline Equals Inevitable Dollar Collapse

Orchestrating The Dollar Collapse!

The Obamunists do not know how to tell the truth and would not tell it to you even if their positions and actions were actually designed to help the American people rather than to subjugate them! They cannot get elected by telling you what they are truly about. That’s why they run to the center and govern to the “extreme” left. The Stimulus Package, Health Care, Cap and Trade and their actions in the Gulf are designed to reduce American power, not enhance it.

With that said, let’s take a look at what is really happening with the U.S. economy and gold. Never forget that the two are inexorably joined at the hip.

M3 Is The Key!

Money has been traditionally tracked by three measures, M1, M2 and M3. Each of these measure slightly different views of the money supply. For some reason, only known to the elites in government, the M3 measure was dropped in the U.S. in 2006. It was not dropped by foreign banks and independent analysts.

The following definition of the three measures comes to us courtesy of InflationData.com

“The most restrictive, M1, only measures the most liquid forms of money; it is limited to currency actually in the hands of the public. This includes checking accounts travelers checks, and other deposits against which checks can be written. Of course the money supply is much bigger than that. What about savings accounts? “

“M2 includes all of M1, plus savings accounts, time deposits of under $100,000, and balances in retail money market mutual funds. But if you have money in a money market mutual fund would you consider that money? Of course so there is M3.”

“M3 included all of M2 (which includes M1) plus large-denomination ($100,000 or more) time deposits, balances in institutional money funds, repurchase liabilities issued by depository institutions, and Eurodollars held by U.S. residents at foreign branches of U.S. banks and at all banks in the United Kingdom and Canada.”

The M3 money supply in the U.S. is shrinking at an accelerating rate that is currently matching the decline last seen between 1929 to 1933. This is occurring in spite of, or to put it more accurately, because of the actions of the Fed and the Obama Regime. We are rapidly approaching the days when the recession/depression will become a full blown depression unless the adults step in and get the government out of the way of the free enterprise system!

The M3 money supply fell 9.6% from February through April, from $14.2 trillion to $13.9 trillion. On the institutional money market side, the funds fell a whopping 37%, the largest drop ever recorded.

Professor Tim Congdon from International Monetary Research said,

“It’s frightening, 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,”

It is odd that the regime would reject a professor’s assessment of the situation and run back to their Keynesian solutions because their whole regime is composed of academics. (Sarcasm is definitely intended.) God forbid that they actually have someone on their team advising them who has actually run a business and met a payroll!

Even the IMF, who they love, is saying that U.S. debt will reach 97% of GDP next year! Wake up already! Europe is running away from their socialist spending spree and we are heading down the path they took and saying that it is the answer. The government is using the same medicine, “quantitative easing”, and expecting different results. What they will find when all of this foolishness ends, is that we have a full blown DEPRESSION, along with a hyper inflated currency!

Gold is reacting to this socialist folly as it has throughout history. It is becoming the currency of last resort. The Obama Regime’s “summer of recovery” campaign is a joke. The economy is cratering and no amount of teleprompter time will alter the facts. When you price the DOW in gold and not in dollars, it is clearly in a down trend. The key thing to note here is that the second leg of this “double dip” is just in its beginning phase. There is a lot more fun to come!

Government Run Amok!

Americans face one bit of discouraging news after another. The overall psyche of the country has not seen more debilitating news since Jimmy Carter was president. Let’s start with the consumer confidence numbers.

Consumer Confidence Numbers

End of Day Rally Due?

WallStreet Journal Market Beat

June 29,2010

By: E. S. Browning

“If today is nothing more than a typical market reaction to weaker-than-expected consumer-confidence numbers, stocks should start rallying about now.

That, at least, is the conclusion of a study done this morning by Bespoke Investment Group. Bespoke calculates that today’s dip in the Conference Board’s consumer-confidence reading to 52.9 from 62.7 a month ago was the sixth worst miss, compared to the consensus expectation of about 62.9, since 1999.”

Housing: Existing and New

Now let’s move on to housing and see if the reincarnation of Jimmy Carter has brought us any significant progress on that front. This comes to us via MarketWatch.

The housing market index dived to 17 in June from 22 in May, the NAHB reported.

All three components of the index fell in June, and home builders were more discouraged in all four regions of the country. “The recovery in home building will be slow due to the elevated level of unemployment, tight credit conditions, high rates of homeowner and rental vacancy rates and the high level of homes available for sale,” wrote Gary Bigg, an economist for Bank of America Merrill Lynch. The index was lower than the 21 that was expected by economists surveyed by MarketWatch, and was the lowest since it hit 15 in March. The five-point drop was the most since November 2008.

To add insult to injury, it was announced on Wednesday that new home sales fell twice as much as expected. In other words, the bottom fell out of the new housing market. This from Hann Bandholz, chief U.S. economist at Unicredit Markets.

“Sales fell almost twice as much as expected;” he said, and what makes it “even more concerning is by far the biggest public support for the housing market is still in place.” The government continues to insure or guarantee nearly every mortgage in the U.S. through the Federal Housing Administration, Fannie Mae and Freddie Mac.

“Housing could be in for a double-dip downturn,” said Sung Won Sohn, economics professor at California State University Channel Islands. The abysmal performance of home sales since the tax credit expired shows “how dependent the fledgling housing recovery is on government help” and is forcing the Fed to be more cautious about withdrawing support, he said.

It is only fair to note that a decline in new home purchasing was expected after the first time home-buyer’s tax credit expired on April 30th, but no one expected that the “experts” would be off the mark by double. If only the right people were to implement Socialism it would work as it should. The scholars of academia should at least be intellectually honest enough to recognize that this latest bunch have done no better than any of the other tyrants that have tried to make Socialism/Marxism work. This bunch can’t shoot straight! (Probably because they are anti-gun as well!)

The government quickly acted to extend the housing credit through September of 2010 after seeing the consumer confidence numbers. Crank up the printing presses, it is “quantitative easing” from here to as far as the eye can see, or rather until the dollar comes unglued.

Unemployment

I am on a roll here, so let’s look at how the wonders of Obamunism have helped unemployment. This video is a beaut. They screwed it up the first time by putting all the money toward growing government and now they think we are stupid enough to let them do it again? Insanity: Doing the same things and expecting different results.

Gold is the Currency of Last Resort!

It is pretty clear that if you combine the state of the U.S. economy with an accelerating shrinkage of M3, we are circling the drain along with the dollar. Gold will be the beneficiary of the misguided policies of Obamunism.

Make no mistake about it, I would much rather see the price of gold go down and have a stable U.S. currency, but that is just wishful thinking with the Community Organizer In Chief in charge. Being forewarned is to be forearmed.

Gold has performed like the currency that it is when governments abuse the trust of their constituents. Look for gold to move sharply higher as the next round of “quantitative easing” is forced down the throats of the American public. Use dips in price to acquire more gold and especially silver. Silver should have a greater percentage gain as the the next leg up gets under way in the precious metals sector.

Keep in mind that there is the possibility that the gold stocks will get washed out with the general equities. With that said, I feel that they will go down, but they will also recover very quickly as gold rises in price. I recommend selling gold stocks into strength when you have 20% to 30% gains. This market is going to get very volatile and you need refrain from getting greedy and take paper profits when they are there. Maintain your core position and prune it wisely.

For those of you that are worried that gold is peaking, a quick look at history should dispel your concerns. At present, only 0.8% of all the world’s financial assets are invested in physical gold, gold stocks, and gold ETFs. During the Great Depression, circa 1932 the allocation was 20%. When the last bull in gold was at its peak in 1980, the allocation was 26%. There is obviously a lot of room for this gold bull to run before it gets anywhere near a peak. In fact, hardly anyone is even interested in gold at this time and it is hitting one new all time high after another.

The Fed in collusion with the Obama Regime is hell bent on another round of “quantitative easing” which should open the door to hyper-inflation. Use what time we have left to get prepared because things are going to get nasty as the M3 decline equals an inevitable dollar collapse. Acquire gold and silver NOW if you have not done so to date.

Till next time, good luck and good trading!