NOW WE KNOW THE BIG PICTURE...

[HiLoSilver]

... about why the Fed discontinued reporting the M3 money supply. From a market update on Yahoo, commentary on Monday,04/03, 9:30AM CST:

"The stock market held up well this week considering the interest rate situation. On Tuesday, the Fed raised the fed funds rate target from 4.50% to 4.75%. Over the past week, the 10-year yield rose from 4.67% to 4.85%. Yet, despite the increase in interest rates across the yield curve, the S&P only lost 8 points on the week."

The Fed is flooding the economy with liquidity and raising interest rates.

Raising the interest rates is necessary to continue attracting foreign capitol to finance our governmental and trade deficits. If foreign cash inflows decreased or stopped, then interest rates would be much higher. So this is the lesser cost. Also, it helps prevent/slow down the decline of the dollar.

But to keep the stock market going, it needs cash. And stock markets always go up when there is lots of cash around. So it matters nought if interest rates rise if there is lots of liquidity.

This is the best of both worlds for the Fed, but like any other junkie or dependency oriented person, the bottom gets deeper the longer the inevitable is postponed.

So the stock market, precious metals, and the housing market will all boom together. And maybe bust together, too.<small>
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[G-khan]

If that is what they are doing PM's will fly......................:bandito:

[gunner]

...So the stock market, precious metals, and the housing market will all boom together. And maybe bust together, too.<SMALL>
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How would the precious metals market bust? When the bottom drops out or when there's no new cash inflows, those holding precious metals will always have something of value to others. PMs recognized for 5000 years as something of value - while they're not recognized now, when the fraud of the fiat money system is realized, most will have no choice but to see that which holds value.

[Tn...Andy]

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The Fed is flooding the economy with liquidity and raising interest rates.

Raising the interest rates is necessary to continue attracting foreign capitol to finance our governmental and trade deficits. If foreign cash inflows decreased or stopped, then interest rates would be much higher. So this is the lesser cost. Also, it helps prevent/slow down the decline of the dollar.

But to keep the stock market going, it needs cash. And stock markets always go up when there is lots of cash around. So it matters nought if interest rates rise if there is lots of liquidity.




Well.....I'm curious......how does the FED 'flood the economy' with cash ??

I mean, since our current form of money only comes into being when loans are taken out via the fractional banking system, wouldn't rising interest rates be the opposite of "flooding with cash", since less folks are able or inclined to borrow with rising rates ??

If Joe doesn't borrow, then he can't spend that newly created 'cash' on Sam's new construction house, and Sam can't spread it on to his suppliers and subs, who, along with Sam, could potentially spend that money on stocks, PMs, or whatever.....

[Agile]

Well.....I'm curious......how does the FED 'flood the economy' with cash ??
I'm kinda new to all this, but I think I see it.

Fed buys newly created government debt (treasuries). The government spends that money. Tada! New money has entered the economy. And total government spending is a sizable chunk of all spending, so... The Flooding part probably comes from the amount. If you create and then buy a bunch in a short period, that could be called a flood. :-)

The higher interest rates (hopefully) mean the fed isn't the only one buying at the auctions. It's intended to (continue to) attrack foreign buyers as well.

[Tn...Andy]

Nah.....don't think so.....the amount of federal borrowing, no matter WHO is buying it, has remained relatively constant ( though rising ) for the last several years.....you couldn't call it a "flood" unless you say that has been the case for years and years....

And as I said, FED rates going up means less borrowing, and creation, of new money.

So, again, I ask....HOW do you flood cash into existence without lowering interest rates....which IS what the FED did several years ago. It's not like they simply literally throw it out a helicopter door........"Here is it....ya'll help yourselves and go spend it"

( Well, unless it's one of our CONgresscritters flying over a foreign disaster area....then I think they really DO fling bales of it out a helicopter door )

[mightyspuds]

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But to keep the stock market going, it needs cash. And stock markets always go up when there is lots of cash around. So it matters nought if interest rates rise if there is lots of liquidity.

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Excellent post.The market is all artificial,because we have all the 401k money flowing into it.
At least thats my take on it,FWIW.

Spuds:sheep:

[SilverNuts@Bolts]

It's the foreigners. All the surpluses, created from selling goods, to the US are recycled back, into treasures, thus partialy offsetting the drop, in the dollar. That's why, the interest rate will keep climbing, for a long time; no matter what is said.

[Agile]

It's the foreigners. All the surpluses, created from selling goods, to the US are recycled back, into treasures, thus partialy offsetting the drop, in the dollar. That's why, the interest rate will keep climbing, for a long time; no matter what is said.

That would make interest rates fall. If foreigners were competing for our debt, we could charge less for it. Actually, the opposite is happening. We sold so much, the demand at current interest rates is falling off. So we raise interest rates to make it more attractive.

[Agile]

Nah.....don't think so.....the amount of federal borrowing, no matter WHO is buying it, has remained relatively constant ( though rising ) for the last several years.....you couldn't call it a "flood" unless you say that has been the case for years and years.... This is what Mogambo continously rants about. How the Feds are, in fact, flooding the economy with more money.

And as I said, FED rates going up means less borrowing, and creation, of new money. No, that's what it would mean for you and me. They're raising rates because they're having trouble selling debt at the current low return. They have to raise it to make it more attractive.

So, again, I ask....HOW do you flood cash into existence without lowering interest rates....which IS what the FED did several years ago. Low interest rates encouraged domestic use of the money (mortgages). But that market is dangerously overextended. Cheap money would just continue to fuel the housing boom. Raising interest rates kills the housing boom and continues to attract foreign investors.

It's not like they simply literally throw it out a helicopter door........"Here is it....ya'll help yourselves and go spend it"
They can do pretty much exactly that. Fed buys gummint debt. Gummint uses money to pay salaries, purchase goods and services, etc. Money almost immediately enters economy.

[NUTS!]

So, again, I ask....HOW do you flood cash into existence without lowering interest rates....which IS what the FED did several years ago. It's not like they simply literally throw it out a helicopter door........"Here is it....ya'll help yourselves and go spend it"
I'd say government spending has increased astronomically. Take a look at government spending over the last 50 years.

Also, government spending is a huge amount. The budget for war for the US for the next while is over 2 trillion. That's 25% of the debt ever created by the US spent in the next few years. In comparison, the richest man in the world (currently Bill Gates) has over 40 billion. All his money is just 2% of what the US will spend just on military projects.

Take a look at the rising money aggregates like M3 to see whether or not they're "flooding" money. They most certainly are. I think GDP leaves a bit of the story out of the picture, but the increase in money supply far outstrips any economic growth. Also, I believe that economic growth was fueled entirely by debt, which also increases the money supply.

Consumer debt and mortgages are probably the largest increase in money. Every time you borrow 100 the bank only has to have 10. Poof, they've just increased the money supply 9 times over.

[electric-amish]

I don,t think the government buys with Cash--How will this be inflated, or is it just the banks and credit cards ledgers that are increaseing?

[Agile]

If you mean actual paper dollars, no, not usually.

But anyone who gets a pay check or social security check direct deposited isn't getting paid with cash either. There's way more money in circulation than just the amount represented by pieces of paper.

[GREENSILVERHORN]

Asset inflation, hook the printing presses up to the stock market as if on life support.

Banks rule us.

If I told you tommorrow your gold tripled in value would you sell it?

And, Yes this will lead to the big bang theory.

[Ragnarok]

It's a vicious circle... and you all are playing the game...

Yes, the bank created that money out of thin air when you went to "borrow" it by asking them for a loan...

BUT... you promised to pay back more than they gave you (interest)...

You have to get that additional amount from somewhere, and the rates are going up... the top is playing with the control rods...

Uncontrolled thermofinancial chain reaction when critical mass is reached... until then nothing much seems to happen and everything looks... peachy...

We're just below threshold now... you all are toast... :smile:

Ragnarok

[GREENSILVERHORN]

It's a vicious circle... and you all are playing the game...

Yes, the bank created that money out of thin air when you went to "borrow" it by asking them for a loan...

BUT... you promised to pay back more than they gave you (interest)...

You have to get that additional amount from somewhere, and the rates are going up... the top is playing with the control rods...

Uncontrolled hermofinancial chain reaction when critical mass is reached... until then nothing much seems to happen and everything looks... peachy...

We're just below threshold now... you all are toast... :smile:

Ragnarok

Hey now, I've seen this before.:rolleyes:

[Silverity]

... about why the Fed discontinued reporting the M3 money supply. From a market update on Yahoo, commentary on Monday,04/03, 9:30AM CST:

"The stock market held up well this week considering the interest rate situation. On Tuesday, the Fed raised the fed funds rate target from 4.50% to 4.75%. Over the past week, the 10-year yield rose from 4.67% to 4.85%. Yet, despite the increase in interest rates across the yield curve, the S&P only lost 8 points on the week."

The Fed is flooding the economy with liquidity and raising interest rates.


Global US dollar liquidity may be going up but the rate of change is going DOWN not up. See graph.