Tuesday, December 21, 2010

The U.S. Dollar: Backed By The FULL FAITH AND CREDIT Of The Federal Reserve Printing Press

And print money is what the Fed has been doing best - really since 1971 after Nixon closed the gold window:

(click on chart to enlarge)

And really this chart just shows M2, since the Fed has removed its reporting of M3 since March 2006.  The missing component is large eurodollar deposits.  My friend and colleague "Jessie" wrote an excellent summary of how the Fed is exploiting this category to really ramp up the money supply off the books.  His essay can be found HERE

As a follow-up to my commentary yesterday on the looming State/municipal catastrophe, check out this post on Clusterstock today - LINK.  Not only are most large cities strapped with massive budget deficits, but as the analysis in the Clusterstock piece demonstrates, municipal property tax receipts are going to take a big dive.  This will just add gasoline to the fire.  Expect the Federal Government to bail out this situation via even more Fed printing.

Finally, check out this King World News interview with James Turk, who explains why we are in the incipient stages of hyperinflation: 
Rising interest rates along with the surge in commodity prices that we have been seeing in the back half of this year is writing on the wall that hyperinflation is very near.  If anyone needs further proof just look at what QE2 is already doing.  The Fed is turning government debt that the market doesn’t want into currency which is the cause of all hyperinflation.
The link to this quickie is HERE.  Essentially, if you are not accumulating precious metals right now, expect that your financial well-being eventually will be tragically compromised.  I'm thinking the new slogan on U.S. currency should be:  "In the printing press we trust."


  1. Which one of the 2 guys in the photo is Ben?

  2. Not a very encouraging report on ECU from Choristopher Ecclestone's blog.


  3. Chris Ecclestone puts out bearish research on ECU on behalf of a hedge fund that is short. His work is inaccurate and extremely misleading. He has turned down every invitation by management to get together and go over the story. He is basically a slime-ball. We think he is fronting his research for Citadel Capital, which owns Etrade. The second largest shareholder of ECU has detailed evidence supporting the fact that Etrade is contantly shorting the stock.

  4. When Trust Matters: LOL. I guess Ben could be either one.

  5. Dave--on the issue of FRN: just thinking while typing: our FRNs state just that-A "Federal Reserve Note". it does not specify the piece of paper is a "US of A Note" and we all know the Fed is not part of the US Govt; it's not even as close as an off shore Enron entity was to Enron.

    While (most) everybody is questioning the value of the FRN being backed by gold there may be a far larger problem: our FRN's are backed by the Federal reserve, a legal entity with a balance sheet loaded with toxic assets from 1-3 years ago, and Treasuries bought as a backstop for the Treasury which since rates have moved up a bit might be valued at a loss just from rate changes.

    We may as well be conducting business with Monopoly Money.

  6. Hal that's a great way to look at this. I never thought about that aspect before in terms of the Fed backing.

  7. Dave: in my corporate days I was involved in many legal issues related to "piercing the corporate Veil" where companies would try to isolate liability where if there was litigation it would not take down the entire company.

    The above thought process is just another step in that direction, The US Govt (in theory OUR govt)has since the 60's when it got rid of silver certificates (don't know when gold certificates were trashed) had something else in mind when issuing FRN's.

    When you think about it--what is the Fed Reserve balance sheet that is backing all the paper dollars out there.

    The gold or lack thereof is a different problem.

  8. ben is the healthy looking fella on the left, thats the Dollar on the right.Ready to rally though, from the look of him...