M-3
It appears clear not that given the very real prospect that we will be unable to fill our current account deficit using foreign borrowing as a method, The Fed and the Treasury will now have to monetize a very substantial portion of our current account deficit. The fact that the Fed has chosen to hide one of the most important measures of inflation from the population and investors says only one thing; They are desperate.
Many have said over and over again that once foreigners decide to shun our Treasuries, this would be the last resort we had left. However, the move to monetize our debt will be extremely inflationary. Moreover, once foreigners figure out what we are doing in earnest, the dollar will become persona non-grata in global markets. Criminal networks around the world are already demanding Euro's or Swiss Francs and will not accept dollars for their illicit transactions. Because the President and the Congress since the says of Ronald Reagan have shown such fiscal irresponsibility and foolishness, we are the ones who will be in the 'coop' when the chickens come home to roost.
Source
Babylontoday.
The fact is the Fed has already been creating an enormous amount of money in recent months.
Federal
Resrve Bank of St. Louis – 1984
So what the Fed has done, is hide one of the key components that would show that it is actually monetizing the debt because M-3 is the best measure of money growth. Now today, you will not hear that foreigners have stopped buying our T-bills. They are going to hide the truth from the American people for as long as they can, but soon, very soon they will not be able to. Once that happens hold onto your wallets because things will get real ugly.
Once inflation really sets in, Oil sheiks are not going to want depreciated dollars for their quickly depleting oil, so one of two things will happen; they will raise the price or they will switch from dollars to another currency for oil trading. This would be a big and unrecoverable blow to the dollar. Commodities will go up; coffee, tomato's, lettuce, beans, you name it because we import it will start steadily rising in price. As our fiscal situation becomes more desperate look for Uncle Sam to start taxing savings, taxing currency exchanges, taxing housing, taxing toilet seats or just about everything to acquire goods it needs to keep its troops in equipment and raw materials, much of which must be imported. If your are rich, look for capital controls. It may become illegal to have wealth overseas or to take it out of the US.
Many pundits say it won't come to that. I say, at this point in our fiscal dilemma there is no way that it can't come to this, or worse, much worse.
The Fed also decided not to publish Repurchase Agreements.
What is a Repurchase Agreement?
An agreement by which, for example, the Federal Reserve purchases a security for immediate delivery and receives interest at a specific rate from a government securities dealer, with an agreement to sell the security back at the same price by a specific date (usually within 15 days). This arrangement allows the Federal Reserve to inject reserves into the banking system on a temporary basis to meet a temporary need and to withdraw these reserves as soon as that need has passed. - Federal Reserve Board San Francisco
What does this mean?
Under a repurchase agreement ("RP" or "repo"), the Federal Reserve (Fed) buys US Treasury securities from a dealer who agrees to buy them back, typically within one to seven days; a reverse repo is the opposite. Actually, there is a slight variation in terminology for the repurchase agreements in which the Fed is one of the transacting parties. What is known as a repo is called a matched sale, while would otherwise be called a reverse repo is called a system repo. - Wikipedia
If the Fed starts repurchasing our US Treasury Securities in massive quantities and decides to keep them for longer than one to seven days, this is not something they will want people to know because once again, it would show that we are monetizing our debt. Once again the FED is hiding the tools that would show that we they are printing the money to fund the government.
I cannot stress how inflationary this is and how much damage it will do to the dollar. While some in the Fed will try to calm the markets with foolish talk (Poole), rest assured that despite the Fed's enormous power they cannot repeal the laws of supply and demand. One they flood the markets with liquidity, the demand for dollars will wane accordingly. Once that happens prices will rise. The best they can hope for is to try and flood the stock markets with this liquidity and call it prosperity or jack up housing prices some more.
Fasten your seat belts folks, because it looks to me that things are going to get rough from here on out.
Interesting Links
http://www.financialsense.com/editorials/bolser/2003/0602.htm
http://www.babylontoday.com/#fed_secrecy
http://www.freemarketnews.com/WorldNews.asp?nid=2055
By,
Mark S. Watson