Sunday, September 18, 2011

Pay no attention to that Fed Chairman behind the curtain!

The QE3 has set sail

The market is still in Oz.  They appear to be behaving as if the wizard is telling them the truth about his printing press behind the curtain, and reacting as if the next round of quantitative easing (QE3) has not already been initiated.

I don't put much stock in recreational news, or 'infotainment' (haven't had cable TV in years) because I just don't have time to sift through the bullshit.

In any event I believe the data from the Federal Reserve itself shows that QE3 has not only set sail, but is well out to sea.

And per usual, that data is hiding in plain sight.


Psst, hey buddy, can you spare $500 billion?

Or more.  In the past three months, from June 6, 2011 through September 5, 2011 the Fed has added $546 billion digital dollars to the money supply (M2):



I know its a lot to put into perspective, but yes, that's a lot of cheddar, even for Helicopter Ben.  Let's put $546 billion in digital dollars into context (comparative values as of September 17, 2011) just to keep things straight:

  • Total cost of war spent on Afghanistan in 10 years:  $455 billion
  • $546 billion... is enough to buy every share of Apple corporation ($370 billion).  And have still have enough spare change left over to buy all the shares in Google if you wanted it ($170 billion).  And Plum Creek Timber Company, the largest private landowner in the United States, with 6.8 million acres of timber, rock, soil, sand, oil and gas assets.  
  • In another week you'd be able to add Lockheed Martin to your portfolio.  
  • Number of ounces of silver bullion $554 billion dollars could be exchanged for:  13.4 billion troy ounces.
  • Number of silver ounces produced in the US last year:  about 39 million (or 0.3% of 13.4 bn)
  • Number of silver ounces produced globally last year:  about 735 million (or 5.5% of 13.4 bn)
  • Total assessed value of all commercial and residential real estate in the City and County of San Francisco:  $163 billion.
And so on.  You get the idea.


Fiat Roller Coaster Rides only go one direction:  Up

Let's zoom out for perspective. That last spike on the right is the last three months of printing. 


We have already matched the rate and level of the previous money supply inflation, and people are still waiting to see what Bernanke is going to *say* about possibly initiating QE3.

In a fiat system the roller coaster ride only goes up, so it gets pretty dizzy after awhile.

Let's put the growth rate into perspective, by computing Year-over-Year changes in the SA-levels of M2.



The major spikes and peaks correspond to economic dislocation and geopolitical events, such as 9/11.

But it is clear that our present status (on far right) has matched the rate of the previous printing cycle.


Where's Toto?

Let's go back to Oz and recap.  Recall that neither the Lion, nor the Tin-Man nor the Scarecrow .. not even Dorothy herself managed to figure out that the Wizard was a sham at the end.  It was a little mutt dog that pulled the curtain back and exposed the whole scheme.

We need Toto today.  Our mainstream financial media have lost their brains and have forgotten how to do basic journalistic investigation.

Toto come home!




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