< HOME  Tuesday, January 10, 2006

US imports zeros from China to count NEW dollars

If by now you aren't convinced that our lives are being dictated and manipulated by that little green bill, this should make it crystal clear:
M-3 has been launched into outer space, up another $56.3 billion last week, up $92.4 billion over the past two.

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! That's a BIG figure and according to Fx.street, it's lifting the markets. But WHY? The folks at Fx-street posit this educated speculation:
What if Iran goes through with its threat to sell oil for Euros instead of U.S. Dollars? . . . 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).
Now, let me get this straight. They print dollars from THIN air, then buy everything in sight?!! Someone, please, tell me I'm missing something!
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. [haven't they anounced that, already?!!]

The alternative is to punish Iran for - and make no mistake about this - effectively declaring economic war against the United States.

This is in line with what Bernanke recently advocated the Fed should do:

"...whatever it takes to combat deflation, including the buying of long-term government bonds, stocks, real estate, and even consumer goods, such as automobiles, as well as his reference to dropping dollar bills from helicopters, which earned him the nickname "Helicopter Ben."

My guess is that they will stop at nothing to maintain CONTROL. Hold on to your assets; this is going to get ugly.

4 Comments:

At Tuesday, January 10, 2006, Anonymous Anonymous said...

Saddam Hussein declared in September 2000 that he would sell Iraq’s oil in Euros instead of US Dollars. It was this threat to the US Petrodollar hegemony that was the reason for the Iraq War See http://www.ratical.org/ratville/CAH/RRiraqWar.html.

The threat of the removal of the US Petrodollar hegemony is with us again (see http://www.energybulletin.net/7707.html

The Iran-Nuclear issue is a smokescreen - see http://mathaba.net/0_index.shtml?x=496587

 
At Thursday, January 12, 2006, Blogger Akber said...

This is going to get really ugly. According to rumour, Mahathir Mohammad, the ex-PM of Malaysia was the prime motivator of the Iranian Oil Bourse. Mahathir's comments about the dollar are worth studying. Not co-incidentally, he helped Malaysia avoid the currency crisis in East Asia a few years ago.

With military aggression on Iran, the Gulf Wars will probably be known to history as the Oil Wars.

When Blair said in justification of the invasion of Iraq, "it is our way of life at stake . . . let history judge me" -- it was an unspoken declaration of things that are unspoken but understood by many natives of the Western Hemisphere. In this case, it was the tacit understanding that without war now, it will be impossible to maintain the advantages that guarantee you a lifestyle that is above the rest of the world.

The English speakers (English people being used to unusual verbal constructs) voted Bush, Blair and Howard back into office.

Your site is wonderful, but the problems identified are not limited to just the US or Europe. The rest of the world is worse off.

 
At Wednesday, February 01, 2006, Anonymous Tiger Eye said...

This administration will blame the North Koreans for "publishing/conterfiting" all these dollars that are/will be flooding the country. There is a history, whether or not true, that "North Koreans" in the past have produced excellent bogus bill. They will say that they, the Koreans, are responsible for the crash of American currency. Is that why Bush recently announced that the fed will no longer show the M-3 published amounts?

 
At Wednesday, February 01, 2006, Blogger qrswave said...

anon, thanks for the links. Yes, smoke and mirrors, one big marketing campaign that Americans seem eager to swallow.

akber, thanks! I'm going to look into Mahathir's statements. Isn't he the one who said something on his way out of office that ruffled some feathers?

And, yes, you're right. It affects so many more people around the globe more than it affects us here in America. But, my time is limited. You're welcome to contribute. It ought to be much easier when we move to the new domain..;) because there we have categories.

tiger eye, yes. Every now and then they float a story around about Korean counterfeiters. Recently the fed instituted new anti-counterfeiting measures here. With M3 a secret, God knows how much they'll be printing after March.

It's all such a dastardly scam. If only more people knew how abused and debased money is.

 

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