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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Taikun who wrote (16417)	11/21/2004 4:53:35 AM
From: Elroy Jetson	Read Replies (2) \| Respond to of 116555

Using this enlarged chart of MZM, for the past two years, you can just make out the tiny 0.18% one month decline last month. MZM economagic.com As you can see, this sort of noise occurs frequently. Small, one month, declines have occurred five times in the last two years alone. Contrast those tiny blips to the overall expansion of the money supply. Monetarism reigns. It's too bad you couldn't find Marc Faber's alleged comment so we could see what he was talking about. .

To: Taikun who wrote (16417)	11/21/2004 12:53:22 PM
From: russwinter	Read Replies (1) \| Respond to of 116555

Focusing on US money supply alone is a mistake. This is a global inflation tied closely the the symbiotic arrangement between the US and larger Asia. Therefore the marker is US dollar based liquidity (excess money) globally. If the discussion is about global inflation, Asian money supply needs to be considered too. A lot of US money supply is based on borrowing, which then surges abroad to buy consumer products, and junk, then USD is loaned (recycled) back to the US to create more money, which is sent abroad again. That's the mechanism that fuels USD money supply growth. Real money supply will only slow when this recycling rate declines.

To: Taikun who wrote (16417)	11/21/2004 3:24:32 PM
From: GraceZ	Read Replies (2) \| Respond to of 116555

I went and looked at Marc's original remarks. Against the Canadian dollar the US dollar has, so far in 2004, lost 6% but just about 2% against the Euro and it has actually gained against the Australian dollar and the Mexican peso. Therefore, it would be premature to speak about a “dollar crisis” for now. I agree that in the long run the US dollar is a doomed currency, but against what? I cannot see any great value in the Euro, but I still like Asian currencies such as the Singapore dollar, and of course gold and silver , since they are currencies, for which the supply cannot be increased by some intellectually totally corrupt central bankers whose monetary policies will ensure the complete loss of paper money's purchasing power sometime in the future. Concerning the US dollar, much further weakness would somewhat surprise me because, as can be seen from figure 2, US money supply has not been growing much since the month of May of this year. gloomboomdoom.com Then took the original St. Louis Federal Reserve data: research.stlouisfed.org And charted it to reproduce his chart and he is correct to say that MZM is flat to down since the second week in May. While his data checks out, I don't agree with him that he can use that info to predict whether or not we'll see further dollar weakness or a collapse as such an event is as much emotion driven as data driven. Currency movements can't be directly correlated to short term changes in monetary measures, especially picking and choosing which measure you want to follow. But then he goes on to explain that is not the only reason he doesn't see a dollar collapse. In my opinion, for the US dollar to really collapse one would need a strong rise in money supply, which as can be seen above is not taking place at the present time. But there are other reasons why I do not expect a significant breakdown in the value of the US dollar right now. What is telling is that the Federal Reserve made about 32 billion in coupon passes in the past year. 32 billion which completely accounts for the 320 billion uptick in M2 over the last year. During periods of normal loan demand there is usually a 1:10 ratio, for every dollar of permanent there are 10 dollars in loans. They turned on the flow as soon as C&I finally bottomed and picked up. economagic.com Now the previous couple of years, while C&I was plumeting, the Fed did extremely little in permanent creation, but relied on a rising level of temporary open market operations while the money supply soared. The strong rise in the previous two years was due almost exclusively to RE lending which is largely independent of Fed open market operations.