Money Supply Growth

For those of you who are not familiar with the various measures of money supply here is a relatively easy to understand reference.

Money Supply: A Primer

MZM is currently the preferred measure of broad money supply 'liquidity' growth with M2 as the longer term measure standing in place of M3 which was the best and broadest measurement.

US Dollar Very Long Term Chart - Quarterly Update

US Dollar Weekly Chart with Commitments of Traders

When the Funds turn negative on the Commitments, the Dollar rally will be over.

The Fed engaged in more emergency currency swaplines this morning as the dollar short squeeze continues in Europe.

When that short squeeze is over, unless there is a coordinated devaluation in key currencies, the dollar will probably test that 80 support and fail.

Congressional Watchdog to Drop a Bombshell on the US Financial Industry

"...set to call for shareholders in those institutions to be wiped out. 'It is crucial for these things to happen...'"

How about a stiff haircut for the bondholders and defaults on the credit default swaps held by JP Morgan and Goldman Sachs?

It will be most interesting to see how Tim Geithner and Larry Summers respond to this advice from Congressional oversight.


The Guardian UK
US watchdog calls for bank executives to be sacked
James Doran in New York
The Observer,
Sunday 5 April 2009

Elizabeth Warren, chief watchdog of America's $700bn (£472bn) bank bailout plan, will this week call for the removal of top executives from Citigroup, AIG and other institutions that have received government funds in a damning report that will question the administration's approach to saving the financial system from collapse.

Warren, a Harvard law professor and chair of the congressional oversight committee monitoring the government's Troubled Asset Relief Program (TARP), is also set to call for shareholders in those institutions to be "wiped out". "It is crucial for these things to happen," she said. "Japan tried to avoid them and just offered subsidy with little or no consequences for management or equity investors, and this is why Japan suffered a lost decade."

She declined to give more detail but confirmed that she would refer to insurance group AIG, which has received $173bn in bailout money, and banking giant Citigroup, which has had $45bn in funds and more than $316bn of loan guarantees.

Warren also believes there are "dangers inherent" in the approach taken by treasury secretary Tim Geithner, who she says has offered "open-ended subsidies" to some of the world's biggest financial institutions without adequately weighing potential pitfalls. "We want to ensure that the treasury gives the public an alternative approach," she said, adding that she was worried that banks would not recover while they were being fed subsidies. "When are they going to say, enough?" she said.

She said she did not want to be too hard on Geithner but that he must address the issues in the report. "The very notion that anyone would infuse money into a financially troubled entity without demanding changes in management is preposterous."

The report will also look at how earlier crises were overcome - the Swedish and Japanese problems of the 1990s, the US savings and loan crisis of the 1980s and the 30s Depression.

"Three things had to happen," Warren said. "Firstly, the banks must have confidence that the valuation of the troubled assets in question is accurate; then the management of the institutions receiving subsidies from the government must be replaced; and thirdly, the equity investors are always wiped out."

The Credit Bubble Was a Ponzi Scheme Enabled by the US Dollar

They say a picture is worth a thousand words.

Here is a picture of the US credit bubble, with the deleveraging which has just begun.

It is/was a Ponzi scheme, enabled by the advantages of controlling the reserve currency of the world, pure and simple.



It was the US dollar that was monetized, or more specifically US debt obligations, which are now substantially worthless and will have to take a significant haircut in real terms. This is similar to the Japanese experience in which they monetized their real estate.

Ironically, those expecting this deleveraging to result in a stronger dollar could not be more mistaken. The Obama Administration is scrambling to obtain relief from Europe and Asia, getting them to inflate their own currencies through 'stimulus,' in order to continue to hide the unalterable truth - the US must partially default on its debt as expressed in the dollar and the Bond.

This is the inevitable outcome of all Ponzi schemes. Several smaller, private schemes already have collapsed. The big one is yet to come down. And when it does, the foundations of democracy will shake, several governments will fall, and we will once again experience the kind of uncertainty more familiar to those who lived in the first half of the twentieth century.

The sad truth is that the Obama Administration has barely begun the real work of rebuilding the economy. Everything to date is simple looting, paper-hanging, and the rewriting of history.

Until the median wage improves significantly in real terms, and the economy is put back on a productive basis without relying on the unsupported expansion of credit, there will be no recovery, merely sound byte opportunities for the smoke and mirror crowd.

This is the reality.

Non-Farm Payrolls: Revisio ad Absurdum

Orwellian manipulation of government economic statistics, par excellence.







The moving average of the Non-farm Payrolls marked the downturn in the economic expansion with amazing clarity by a steep drop in late 2007. It will also mark the bottom and a sustained upturn when it arrives.

Pictures From a Monetary Bubble

Credit bubbles are very much like pyramid, or Ponzi, schemes.



The middle class is particularly hard hit as they exchange their remaining real assets in an increasingly corrupted financial system. They are dulled by falling from crisis to crisis. We seem to be at the stage where the wealth transfer from the many to the few has it last parabolic gasp before the collapse.



All turns to ashes, one way or the other, when we abandon our commitment to justice and the truth, with things as they really are.

SP Futures Hourly Chart at 2:30 PM

The Jobs Number today was a horror show, not so much for the 'headline number' which is routinely manipulated, but rather in the utterly cynical, almost Orwellian, of the January number down to a breath-taking low.

The Obama Administration did this as part of an effort to spin 'a bottom.'

Is there a V bottom in the making? Is this a legitimate rally in equities?

We don't think it is, at least in terms of the economy. The indicators continue to deteriorate badly.

But we need to be aware of the possibility of an attempt to reflate the asset bubble, and this will show up in equities first, with a possible deflation in the Treasury bubble as hot money moves from relative safety to risk.

Everything about this market, and our economy, is directed by expediency rather than principle, and is therefore short term in its goals and outlook.

Having said all this, the market is overbought and the rally overextended. It may get more overbought and overextended, as we saw in the market 'recovery' of 2004-6 in which the US equity indices were managed up to new highs, even while the rot in the real economy spread, crumbling the foundations of wealth.

It is hard to comment on this market, because the Obama Administration is a profound disappointment, to the extent now that our short term optimism and confidence has dissipated.

If Democrats were trying to create a new Weimar Republic it would be hard to imagine a more sincere and effective effort. The problem is that the shadow of what comes next looms over the world like a dark cloud of misery brought about by the madness of men.

US Dollar (DX Index) Hourly Chart

Trichet disappointed today by not cutting the Euro interest rates more sharply to match the monetization of the US dollar by the Federal Reserve.

The US dollar hegemon is based on relativism. The monetization of a fiat currency does not matter so much if the most reasonable alternatives are also in decline. It will show up as an inflation in the price of real goods, but these can be managed in a financial services regime in the short term.

Do not confuse what the Fed and the Obama Administration are doing now with any sort of long term plan. Their bias is the same as corporate management: getting through the short term and looking as good as is possible in doing it.

Obama would like to shift to a longer term strategy, but this is difficult given the huge momentum of malinvestment that grips our national economy.

Nasdaq 100 Futures Hourly Chart at 11 AM

This has the look and feel of an 'official rally' to create the appearance of enthusiam for Gordon Brown's bid to save the world.

Do not get in its way while it is in progress. Buying of the SP futures led us higher yesterday, with the Nasdaq 100 confirming with its own breakout attempt.

Jobs Report tomorrow is key.

We would rather miss a portion of a move than be early and suffer losses and exhaustion by fighting the tape.

Potential near failure points are at 1312 for the NDX futures and 842 for the SP futures.

Longer term nothing has changed. The real economy is paper thin, the paper being supplied by the US dollar and the monetization of debt to create the appearance of vitality.

SP Futures Hourly Chart Updated at Noon

Here are three views of the SP 500 Futures on an hourly basis.

Notice that in the 'big picture' there is still an inverse head and shoulders bottom that is an active formation.

The question is whether this downturn is a natural fallback from the obvious tape painting exercise that occurred for the end of quarter, or a trend change that will challenge the inverse bottom.

Time will tell. But since the real economy continues to deteriorate, albeit at a less shocking rate of decline, we doubt this very much unless the government begins to encourage monetary inflation with abandon.

So, our bias is to the downside but keep an open mind. We would expect a fresh decline to test the prior near term bottom at the very least, with an eye to the lows if that gives way.

One might conclude that the rally we have seen is just a 'back-kiss' to the bottom of the longer term uptrend channel which, if it fails, brings a very bearish cast to the charts indeed.

We have to add, in editorial fashion, that the Obama administration is a complete failure when it comes to putting the economy in order. This is because of the embedded thinking from Summers and Geithner and their backers at the big five money center banks.

There will be no recovery until the banks are restrained, made into banks once again, and speculation is wrung out of system to be replaced by productive efforts and the creation of real wealth.

We prefer to attribute bad results to incompetence rather than inappropriate motives, but we're keeping an open mind with regard to these jokers.