Fun with Federal Reserve Money Supply Charts

[wwswimming]

Just looking at these.

http://research.stlouisfed.org/fred2/categories/123

You can put all the curves on the same graph -

But to understand them, I suggest looking at the Board of Governors non-borrowed reserves (BOGNONBR). All the other curves seem to follow it.

2 Points of Inflection (PoI) -
* in 2008, Down
* in 2009, Up

QE1 monetization formally announced March 18, 2009.

from
http://research.stlouisfed.org/fred2/series/BOGNONBR?cid=123


Bank reserves that don't have to be borrowed - that's good, right ? More is better ?

Of course all the money shown as being created in the "Up" part of the curve, from 2009 to 2011, was printed (that's a metaphor, it's all electronic.).

All those non-borrowed bank reserves. $1.4 Trillion worth.

Basically, that was money that was created to back-stop the bank losses, from credit derivatives, i.e. from Mortgage Backed Securities and their many derivatives.

For reference, "Excess Reserves of Depository Institutions" (EXCRESNS) ... like I said, similar to the BOGNONBR curve.


For people who are interested in central banking, i suggest Jim Rickards interviews with Eric King.

Rickards is one of the best at explaining economic & political events, and he has a broad & deep background. [/b]He was one of the principal negotiators in the 1980 hostage release with Iran, and he also part of the "Tiger Team" that the US gov. assembled to deal with the implosion of LTCM in 1998, which would have been a lot like 2008, 09, etc. if not for the people who cleaned up after LTCM.[/b]

http://kingworldnews.com/kingworldn...Jim_Rickards_files/Jim Rickards 5:14:2011.mp3

http://kingworldnews.com/kingworldn...Jim_Rickards_files/Jim Rickards 4:30:2011.mp3

http://kingworldnews.com/kingworldn...Jim_Rickards_files/Jim Rickards 4:17:2011.mp3

Rickards knows international currency markets and commodity markets upside down left right etc. His work as a member of the LTCM clean-up team involved dealing with a 400 ton contract for gold delivery for which there was no gold to deliver, aka a "naked short" position.

Rickards job was to unwide the contract without causing the US $ to devalue to much.

Rickards was one of the implementers of the Petro-dollar policy, where the US schemed cajoled etc. to get the US $ as the only currency in the prime oil markets. e.g. Saudi Arabia. Which is one of the reasons the US can get away with printing Trillions of $ and Zimbabwe can not.

Anyway, Jim takes time out from his work at Omnis, sort of a mini-Rand corp.
http://www.omnisinc.com/

... to talk shop with Eric King @ Hing World News], who is far more knowledgeable about finance than most finance journalists.

I don't understand all these curves, but I know they tell us something about the historical economic events of 2008 to present in the economy.


Conclusion from looking at the Fed curves -

United States money reserves had a normal and stable value of up to 50 billion dollars in 2007. This fell to -$200 Billion in 2008 (the banks had to borrow their reserves, bad for bank stability) and then grew to $1.4 Trillion in 2009 through 2011. It's a little hard to tell the dates because the horizontal axis is too skinny.

What's it mean ? How does it affect my ability to save & invest ? That's why I listen to Eric King interviews and Jim Puplava interviews.

http://www.financialsense.com/financial-sense-newshour

 

[airdata]

http://www.youtube.com/watch?v=V4e8Cb-Dc4I

Quantitative Easing explained. Very good video.

 

[drebo]

Threads like this always depress me.

 

[First]

So can any of the dopes that have been pimping the idea of eventual dire inflation explain why we still haven't experienced any of it? As in, at all? Barely even a little bit? I'd love to hear how increasing the money supply/base increases inflation.

 

[CycloWizard]

So can any of the dopes that have been pimping the idea of eventual dire inflation explain why we still haven't experienced any of it? As in, at all? Barely even a little bit? I'd love to hear how increasing the money supply/base increases inflation.

Who determines the rate of inflation and how is it calculated? Even BLS shows a steady increase in the rate of inflation. See p. 2, "All items," as opposed to the number they now usually report - "All items less food and energy." They prefer the latter because energy and food costs are way up, never minding the fact that most people do indeed consume energy and food. The bottom line is that BLS can weight the changes however it chooses to yield the desired result. The argument that increasing supply decreases the value of money is pretty straightforward: if everyone has a bazillion dollars, $1 isn't worth anything and you'll be pushing a wheelbarrow to the store to buy a loaf of bread. Scarcity is a huge factor in determining value of any commodity. If oil was gushing in every backyard in the US, it would be cheap.

 

[frostedflakes]

So can any of the dopes that have been pimping the idea of eventual dire inflation explain why we still haven't experienced any of it? As in, at all? Barely even a little bit? I'd love to hear how increasing the money supply/base increases inflation.

http://en.wikipedia.org/wiki/Quantity_theory_of_money

 

[Zebo]

What's hilarious, or maybe not so much, is we are reaching the rather obvious point that all this new debt is creating NEGATIVE changes in economic activity and they are already pimping QE3. We are headed for an economic catastrophe when bills are due and cash flow is not there.

 

[Zebo]

So can any of the dopes that have been pimping the idea of eventual dire inflation explain why we still haven't experienced any of it? As in, at all? Barely even a little bit? I'd love to hear how increasing the money supply/base increases inflation.

You're high. You believe that FED bullshit that factors in stuff deflating because people are spending all their money on necessities of life which are inflating into stratosphere? I would quote Mark Twain but I think you know it.

 

[BoberFett]

You're high. You believe that FED bullshit that factors in stuff deflating because people are spending all their money on necessities of life which are inflating into stratosphere? I would quote Mark Twain but I think you know it.

But but but housing is cheaper! All everyone has to do is sell their home, take a massive loss, and buy something else, and then everyone will be feeling the effect of this deflationary joy.

 

[-Slacker-]

So can any of the dopes that have been pimping the idea of eventual dire inflation explain why we still haven't experienced any of it? As in, at all? Barely even a little bit? I'd love to hear how increasing the money supply/base increases inflation.

I don't understand ... doesn't printing more money that isn't backed by an economical increase devalue the currency and is inflation by definition?

 

[Zebo]

Houses won't fall in price....subprime is contained.....there is no inflation.....we are in a recovery.....least that's what I heard from Benny the B the PhD.

 

[BoberFett]

Houses won't fall in price....subprime is contained.....there is no inflation.....we are in a recovery.....least that's what I heard from Benny the B the PhD.

http://theeconomiccollapseblog.com/...id-that-you-wont-know-whether-to-laugh-or-cry

 

[LegendKiller]

You're high. You believe that FED bullshit that factors in stuff deflating because people are spending all their money on necessities of life which are inflating into stratosphere? I would quote Mark Twain but I think you know it.

meh

 

[BoberFett]

meh

Yeah. That pretty much sums you up.

 

[wwswimming]

Who determines the rate of inflation and how is it calculated? Even BLS shows a steady increase in the rate of inflation. See p. 2, "All items," as opposed to the number they now usually report - "All items less food and energy."

this is the bullshit of US gov accounting, and why i admire John Williams at Shadowstats.

they include food & energy in retail sales numbers.

the US gov moves the goal posts so many times, if i was a referee, i'd call a time-out !


John Williams worked for the government measuring all these things back in the 60's & 70's.

when they started moving the goal posts, he got pissed off and started Shadow-stats.

all he's doing is using consistent measurement techniques.

recent interview with him & Jim Puplava at
http://www.netcastdaily.com/broadcast/fsn2011-0531-1.asx

he's basically an upbeat guy - he makes good money - but he doesn't have positive things to say about the US $. his weather forecast is "further major dollar devaluation."


Puplava manages money & does a real good job at it. he takes the time to explain things like "out of the money puts".

 

[First]

Who determines the rate of inflation and how is it calculated? Even BLS shows a steady increase in the rate of inflation. See p. 2, "All items," as opposed to the number they now usually report - "All items less food and energy."

The average inflation rate for this year is less than 2.5%, despite recent increase in prices, so your point doesn't mean much when you look at the actual numbers.

They prefer the latter because energy and food costs are way up, never minding the fact that most people do indeed consume energy and food. The bottom line is that BLS can weight the changes however it chooses to yield the desired result.

Except all governments and most private institutions use generally the same methods for inflation, since food or energy prices often rise for reasons entirely unrelated to the U.S. dollar, the Fed, or frankly anything to do with the USA period. So it's asinine not to have separate measures. And even factoring in food and energy prices inflation is still low this year, and that's fact: http://www.tradingeconomics.com/united-states/inflation-cpi

The argument that increasing supply decreases the value of money is pretty straightforward: if everyone has a bazillion dollars, $1 isn't worth anything and you'll be pushing a wheelbarrow to the store to buy a loaf of bread. Scarcity is a huge factor in determining value of any commodity. If oil was gushing in every backyard in the US, it would be cheap.

Except it's never, EVER the case that the monetary supply/base increases without also seeing the number of people transacting dollars increasing. This notion that increasing money supply increasing inflation is merely true in theoretical sense, all else equal. In the real world it doesn't work that way, velocity of money is constantly increasing and that's why we haven't seen inflation despite trillions of U.S. dollars being pumped into the worldwide economy. There are a shit-ton of people on the planet.

 

[CycloWizard]

The average inflation rate for this year is less than 2.5%, despite recent increase in prices, so your point doesn't mean much when you look at the actual numbers.

You're right - it doesn't mean much, unless you've taken calculus. d(CPI)/dt has been a positive constant for months now. That constant is the rate of increase in CPI. Look at the other times this has occurred historically in your own link - it never ends well.

Except it's never, EVER the case that the monetary supply/base increases without also seeing the number of people transacting dollars increasing. This notion that increasing money supply increasing inflation is merely true in theoretical sense, all else equal. In the real world it doesn't work that way, velocity of money is constantly increasing and that's why we haven't seen inflation despite trillions of U.S. dollars being pumped into the worldwide economy. There are a shit-ton of people on the planet.

I'm not sure what hole in the ground you're living in because I have certainly seen inflation. Your argument is simply that we can print more and more money without inflation as the population of the planet continues to increase? That's simply ridiculous. If we have produced $2 trillion in new dollars and there are 6.7 billion people on the planet, that's $298 per person - a significant chunk (4.25%) of the average global wage. However, since only a small fraction of the population uses dollars, the result is obviously much more concentrated. Scarcity is a huge factor in determining the value of anything, including money.