The Fed's Money Supply Armament is Underway

[Clara T]

The Fed's Money Supply Armament is Underway
by Robert McHugh

M-3 has been launched into outer space, up another $56.3 billion last week, up $92.4 billion over the past two. This is some real horsepower. Over six weeks, the meaningless figure, ahem, is up $177.8 billion. These annualized growth rates are 28.7 percent, 23.6 percent, and 15.3 percent respectively. Those are the seasonally adjusted figures. The raw, non-seasonally adjusted, figure is up $293.3 billion over the past 12 weeks, on a pace to add 1.2 trillion in money to the economy. Wow. There must be a need for this. Maybe the master Planners see a coming need to monetize our debt? To support markets? They tell us the economy is good, so clearly they cannot be stimulating our way out of a recession. There's a lot of money flooding the economy and it has to go somewhere. Right now it is lifting markets.

The following is pure educated speculation: What if Iran goes through with its threat to sell oil for Euros instead of U.S. Dollars? Well, then Dollars won't help you much if you want to buy oil from Iran. So, you sell the Dollars you are holding for Euros. Whenever anything is sold en masse, its value drops. This means less demand for Dollars, which means the Fed will not be able to print excessive amounts of Dollars without further driving down the Dollar's value. There would simply be too much supply. Right now, the Fed can print all the Dollars they want because the demand for Dollars has been on the rise, especially as the cost of oil has risen. In other words, lately it has taken more Dollars to buy oil, so the demand for Dollars has been up. Again, this extra demand has allowed the Fed to print all it feels like with little consequent damage to the Dollar.

However, if the Dollar were to tank - and the Iran oil Bourse should push the Dollar in that direction - it puts pressure on Treasury Bonds and other U.S. financial assets to fall as well, since they are denominated in a declining-value currency. In this event, the Fed would have to step up its buying of U.S. financial assets to lend support to these asset prices - to stabilize U.S. markets. In other words, the Fed would have to monetize the U.S. Treasury's debt, and also monetize equity markets (be the buyer that keeps prices from falling). This would take so much fresh money that the Fed would need to create it in secret. Thus, they would have to announce that they are no longer going to transparently reveal the level of the money supply, but will hide it. The alternative is to punish Iran for - and make no mistake about this - effectively declaring economic war against the United States.

If this speculation is true, then the Master Planners are likely preparing accordingly. But if this is true, you just wish there would be more forthright communication with the American people.

http://safehaven.com/article-4403.htm

[teryang]

1. Seeking sanctions on Iran through the security coucil may be...

...the course of action to stop the bourse. Except that most believe that Russia and China will not comply.

Bombing Iran may be the desperate fall back plan.

Either course will be quite harmful to the American economy.