Freddie Mac, Fannie Mae, Credit Crisis, Foreclosure, Government Bailout, M3, Inflation, Money Supply, Government Broke, Bear Stearns
Ok, so I didn’t predict this specifically, but it is definitely in line with what I was saying before about the credit crisis and the government interaction in it. It will be interesting to see what continues to happen. So far this year, publicly, the government has forked out about 1.4 trillion in handouts in an attempt to ‘save’ the economy. About 200 Billion with the economic stimulus, 200 Billion to Bear Stearns, and 1 Trillion with the recent Fannie Mae & Freddie Mac bailout. Where will this end? It doesn’t seem like the US Government is beyond taking over the whole private banking system by the way it is acting. Also we have to consider the financial implications involved here. Where is the money coming from that the US Government/Federal Reserve is using to do things such as the bailout?
Well it seems that they might be just ‘printing’ the money, or in other words, creating numbers in the financial system. In today’s system real physical money doesn’t even have to be printed, just add some zeroes. What this really means is that like I said before the government is essentially borrowing money from the citizens, and from other governments that we have debts to in $US. Borrowing from citizens doesn’t just mean tax dollars. This is a different type of borrowing, in addition to the borrowing that is done by taxation. The borrowing that I am talking about is the borrowing of currency dilution. If we, as citizens currently communally owned a total of $10 Trillion dollars and the government introduced another $1.5 Trillion into the cash flow, the same $10 Trillion as before now has the value of $10/11.5 Trillion or $8.7 trillion. So with one swift move, every $10 a citizen had just became worth $8.70, or a 13% drop. Who knows how much money is really in circulation now, and what this calculation would actually be?
The only way we knew in the US, before 2006, was a report called ‘M3′ which told us the current money supply which was not just the physical currency in circulation. Physical money in circulation is just a fraction of the transactions done, about 1/10 or less, by the looks of the 2005 report of the M’s (different types of money). So the best estimate of the current M3 is to multiply the current physical currency by 20, but this is still a conservative estimate because we don’t even know what it is….. Why not? Because the Federal Reserve doesn’t think that this statistic was descriptive of anything.
Sure, Federal Reserve, why would we want to know how much money is in circulation? This is like playing Monopoly, and someone bought another Monopoly game and took the cash out of their game and brought it to your house and played with their cash and yours. How will you know the difference? There is no way to denote the difference because it’s all monopoly money. It’s even worse with digital money because it doesn’t even have to be printed. How is this any different then the money system the colonies had before the American Revolution, which failed miserably? This is also the same as purchasing a stock and not wanting to know how many shares are outstanding and if your share is being diluted by the increased number of shares. That sounds a lot like Fascism. “We don’t think it’s important”, or more likely “We think its very important, but don’t feel like we have to tell you!”
I have done some analysis from the data presented on the Wikipedia site about the M1, M2, and M3 data. I have extrapolated in a conservative manner, showing that if the same rate of M2 to M3 was maintained, which it wasn’t before, which is why its conservative, then by using the published M2 we can estimate that the current M3 is at least $11.4 Trillion. Its last published amount was $10.2 Trillion in 2006. I have attached my work in a spreadsheet. Money Supply, M3
***Update***
I decided to add to this analysis the fact that the british ‘M4′ which is comprable to the US ‘M3′ has increased at a much slower pace, which one could say is attributed to the reason why the GBP is worth twice the dollar. See: Wiki M4
***Update***
See M3 for the FED release, in 2006 that they were discountinuing M3. I posted it below also in case the site ever goes down.:
“On March 23, 2006, the Board of Governors of the Federal Reserve System will cease publication of the M3 monetary aggregate. The Board will also cease publishing the following components: large-denomination time deposits, repurchase agreements (RPs), and Eurodollars. The Board will continue to publish institutional money market mutual funds as a memorandum item in this release.
Measures of large-denomination time deposits will continue to be published by the Board in the Flow of Funds Accounts (Z.1 release) on a quarterly basis and in the H.8 release on a weekly basis (for commercial banks).
M3 does not appear to convey any additional information about economic activity that is not already embodied in M2 and has not played a role in the monetary policy process for many years. Consequently, the Board judged that the costs of collecting the underlying data and publishing M3 outweigh the benefits.”
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