The Invisible M3 and Plumping Up the Economy

[LibertyorDeath]

The Invisible M3 and Plumping Up the Economy

http://www.dissidentvoice.org/May06/Zingh05.htm

May 5, 2006


In March 2006,with practically no explanation, the federal government stopped reporting on M3, the broadest measure of the money supply in the U.S. economy. <1>

The most important “asset” in the 21st Century is not cash, gold, real estate, guns or even petroleum, but Information. “Knowledge” trumps everything. That is why, for example, the telecommunications industry is right now in the process of buying up Congress so that it can finish off “network neutrality” and, eventually, strangle your access to knowledge and information on websites like this one. <2>

Thus, when the federal government suddenly withdraws a well-established multi-trillion dollar measure of the economy's health, skeptical minds wonder if, yet again, the Government's penchant for secrecy is intended to keep us ordinary citizen types from seeing what it is up to. What the Administration is likely “up to” is flooding the economy with billions and billions of digitally created “cheap” dollars. The massive influx of money will juice the stock markets, plump up the economy and, of course, create price inflation. <3>

Other than starting a war (or a series of small wars) <4> and the huge government spending on weapons and military infrastructure that war entails, the next-favorite capitalist means of rescuing an economy on life-support is to increase the money supply and stoke inflation. <5> Sometimes, as in the present circumstances, the situation is so desperate that a government may feel the need to start a “perpetual war” and to massively increase the money supply at the same time.

snip

The only inflation factor that Big Business and the financial sector really care about is Wages, that is your wages. If prices rise, but your wages, relative to your cost of living, remain static, then “inflation” only bites you, dude. The bite taken out of your hide translates into someone else's profit-meal ticket. Thus, when prices rise but wages do not, it is as though a portion of workers’ wages is being ripped off. On the other hand, if your wages rise commensurate with the increase in the real cost of living, then the increase in the costs of goods and services goes back into your wages. In that circumstance, money inflation does not give the owner class anything extra to bite into.

[Vinnie From Indy]

1. The printing presses are probably red hot printing money as

fast as paper can be fed into them.

[ProfessorGAC]

3. That Would Be M1 Money

Cash in circulaton is M1. Doesn't matter how new it is! So much for that theory!
The Professor

[Vinnie From Indy]

7. Gee! Thanks Professor!

I am sure your students love you!

On edit:

I am always willing to learn and to be corrected. I also believe in being polite and civil.

[acmejack]

2. Ain't working!

Gold $700 an Ounce up $23 today whee... started yesterday at $654?? Oh, my!

[ProfessorGAC]

4. Utter Nonsense

First, the economy is not being propped up. There are no academic economists or econometric theorists who buy that the economy is doing well. So, it can't be being propped up if it's in mathematical stagnation.

Secondly, the nominal values are being sustained by two highly visible elements, neither of which require any shady bookkeeping to accomplish.

The first of these is a nearly 40% increase in the price of gasoline and diesel, which represents an industrial sector about 1/15th of the whole economy. Raise the total cash flow to an indispensible good or service by 40%, when it's 6.67% of GDP, and GDP has to increase. It's not a directly proportional value, because some things folks do without, since they need more money to buy gas. But, they're still buying food, clothes, electricity, and other necessities. Their SAVINGS are in the toilet, but the nominal GDP shows added growth just because fuel is so darned expensive.

The second of these is the simple fact of a gov't increasing it's deficit spending by about $80 billion per year. There is nearly 0.7% GDP growth right there! That's 15% of the total announced growth.

Now add in the openly admitted CPI inflation of 2%, and population growth, and the economy is treading water by merely spending of borrowed money by gov't and consumers.

It's all out in the open. None of it good, but it requires no nefarious conspiracy, or hot printing presses, or shadow books. It's smoke and mirrors, but it has nothing to do with some clever behind the scenes machinations. It merely requires fiscal irresponsibility and a complete lack of economic knowledge.
The Professor

[ProfessorGAC]

5. Dupe

. . .

[Jim__]

6. Lenders care about inflation.

I'm not sure who the author includes in the Big Business and financial sector, but, if he includes banks, then I disagree with the statement: The only inflation factor that Big Business and the financial sector really care about is Wages, that is your wages. They do care about wages, but that's not the only inflation factor they care about.

Actually, if inflation begins to drive wages up, it can be a net benefit to people with mortgages. A mortgage is usually the largest expense a family has, and inflation (if it drives up wages) can decrease the relative size of the mortgage payment.