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

To: GraceZ who wrote (16456)	11/21/2004 3:57:59 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

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. What do you think are the implications of this? Thanks Mish

To: GraceZ who wrote (16456)	11/21/2004 4:12:33 PM
From: Taikun	Read Replies (2) \| Respond to of 116555

Grace, While many have pointed to the rise in money supply as a sign of impending financial collapse, I tend to agree with Faber. <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.> In a growing economy, you would expect money supply to expand, and while the pace of economic growth has slowed, since the economy is not contracting it requires a growing money supply. I am wondering about Faber's strong rise in money supply that worries him. Question: if all the US notes that are currently stored as in other countries come back to the US after being converted (say to Euro, Yen or other instruments) will that increase the money supply? I'm thinking notes, primarily: -mafia types around the world storing USD in notes -individual investors storing USD notes -USD notes used as a medium of exchange in other countries, particularly countries with weak financial systems/currencies In addition there will be foreign bank accounts with US currency. Are all of these notes included in money supply or will their return to the US increase the money supply and then qualify for Faber's condition? David