Best regards,.
Bob Taft
The Taft Ranch
Upton, Wyoming
(307) 465-2206
http://www.rumormillnews.com/cgi-bin/archive.cgi?read=74897
"We hang the petty thieves and appoint
the great ones to public office." Aesop

From: semperfidave@juno.com
Sent: Saturday, November 01, 2008 4:11 PM
To: apfn@apfn.org ; jackiepa@npacc.net ; programmersforronpaul@yahoogroups.com ; ronpaulgrassrootsaction@yahoogroups.com ; primarywinforRonPaul@yahoogroups.com ; Conservativeland@yahoogroups.com ; newrepublican2@yahoogroups..com ; ronpaul-541@meetup.com ; RonPaulforPresident@yahoogroups.com
Subject: Fw: [The-Pearl] Federal Reserve INFLATING at 341% per Annum



---------- Forwarded Message ----------
Gary North on current economic affairs and investment markets
Home | Contact Me | Tell a Friend | Text Size | Search | Member Area
 Join Us
Gain immediate access to all of our current articles, the question-and-answer forums, "ten best" lists, and article archives. Click here for details on how to join.
 Free Materials
 About This Site
 Academic Gaps
 Academic Re-Entry
 Articles
 Capitalism and the Bible
 Comic Strips--My Big 5
 Dave Barry Re-Runs
 Economic Analysis
 Federal Reserve Charts
 Free Books by Gary North
 Get Published Here!
 Gold Price & My Report
 Price Index (U.S.A.)
 Questions for Jim Wallis
 Reality Check E-Letter
 Social Security/Medicare
 Stock Market Charts
 U.S. Debt Clock
 Yield Curve
 For Members Only
 Gary North's Miscellany
 Advertising
 Autoresponders
 Blogging
 Budgeting for Wealth
 Business Start-Up
 Career Advancement
 College Finances
 Discount Deals
 Federal Reserve Policy
 Fireproof Your Job
 Goal-Setting for Success
 Inheritance Strategies
 Insurance
 International Investing
 Investment Basics
 Marketing Case Studies
 Peak Oil
 Precious Metals
 Real Estate
 Retirement
 Safe Places
 State of the Economy
 Stocks and Bonds
 War With Iran
Join Now
 Special Reports
 Business Tools
 Members' Free Manuals
 Our Products
 Action Steps
 Article Index
 Contact Me
 Help
 Tell a Friend
 Text Size
 Your Account
 Legal Notes
 My 100% Guarantee
 Privacy Policy
 Terms of Use


home | Articles | The Federal Reserve Is Inflating at . . ..

The Federal Reserve Is Inflating at 341% per Annum. (Don't Look for the Decimal Point.)
Gary North
Printer-Friendly Format

October 24, 2008

I have never seen anything like this. The adjusted monetary base over the last eight weeks has risen at 341% per annum. The increase in the monetary base is $300 billion


  
This indicates panic at the Federal Reserve. The financial system is coming unglued.

The monetary base is high-powered money. For every dollar injected here, the money supply can rise by at least 10 to one. A 10% reserve requirement is imposed on large urban banks, i.e., a 10-to-1 multiplication factor. This is the fractional reserve banking process. This is from the Federal Reserve's site.


  
The recession is pushing down the price of commodities. So far, the new money has gone to banks and financial institutions. They are not lending to businesses. They regard businesses as too risky. This is getting a lot of press.

http://www.bloomberg.com/apps/news?pid=20601170&refer=home&sid=amZ3uCIUB8GQ

http://blogs.wsj.com/economics/2008/10/17/will-banks-lend

These articles never mention the obvious: the banks can lend at any time. They make no money if they don't. They can buy Treasury debt. Central banks do. So can commercial banks. This explains why Treasury rates have not increased, despite the increase in the Federal debt.


  
The Federal government spends every dime it borrows. This money will flow into the economy by way of Washington. This money will not be lent to private businesses. It will not re-capitalize the country. How can it? It is not saved capital. It is fiat money.

If the banks are not lending at all, the monetary base sits there, ready to be used by the banks. At the first sign of economic recovery, they will start making loans. The money multiplication process will take over.

If this expansion of the monetary base does not stop, it will create mass inflation when the banks begin to lend (assuming they aren't lending to the government now).

To stop it later, the FED can sell assets to shrink the monetary base. Which assets? Toxic waste loans? Who is going to buy them? Who wants toxic waste assets in the any stage of the recovery? It can sell Treasury debt, but only until it runs out. It has a little over $450 billion remaining.


  

http://www.cumber.com/home/Factors.pdf

If the banks will not lend at all, then the FED is "pushing on a string." But why won't they lend? They are legally allowed to. Why borrow in the federal funds market if you have legal reserves? Yet banks are borrowing in this market. They borrow because they have no reserves remaining.

Banks can buy Treasury debt, which is liquid. The debt pays some interest. Something is better than nothing. Not to buy Treasury debt is to throw money away. Banks do not throw money away. Banks buy Treasury debt; the government spends it. Businesses seeking loans find that they must pay higher interest, because the Treasury gets the money. So, the government's share of the economy grows. This reduces productivity. An economy in a recession needs productivity to get out of the recession.

The fractional reserve process takes over. The money supply grows. We can see this happening now. Here are the latest M1 statistics. You can see that the figure is headed straight up after years of being flat.


  

Alert anyone you think should see this. Email this page. People can monitor these statistics free of charge on my site. Go to Federal Reserve Charts and Yield Curve, which are in the Free Materials section of my site.




Printer-Friendly Format

__._,_.___

Your email settings: Individual Email|Traditional
Change settings via the Web (Yahoo! ID required)
Change settings via email: Switch delivery to Daily Digest | Switch to Fully Featured
Visit Your Group | Yahoo! Groups Terms of Use | Unsubscribe

__,_._,___

_____________________________________________________________
Earn up to $150/hour as a paralegal. Click to get trained now.


_____________________________________________________________
Click here to find the satellite television package that meets your needs.



No virus found in this incoming message.
Checked by AVG - http://www.avg.com
Version: 8.0.175 / Virus Database: 270.8.5/1761 - Release Date: 11/1/2008 7:56 PM