Wednesday, December 18, 2019

M2 inflation Alan Greenspan

Dear Professor Kaufman,

I attach the latest graph on M2 money supply from the Saint Louis Federal Reserve bank that reports on economic statistics nowadays.

M2 has doubled in the last 10 years, from 8 to 16 trillion.
It took 12 years to double in the previous 10 years, from 4 to 8 trillion.
I can clearly see in the graph that M2 is growing faster in the most recent 10 years.
I can also see it is growing faster yet in the past year.
However M2 is not wildly out of line with past growth.

The USA economy is booming everywhere.
More money is needed to do the transactions needed for a booming economy.
During the Obama depression less money was needed so M2 grew slower.

There has not been much inflation since Ronald Reagan Reaganomics cured inflation.
Low inflation has been helped by cheap imports from around the world keeping price increases low.
Many items are cheaper and/or higher quality than 50 years ago.
The trade war has not stopped imports or made them much more expensive.

1.  Who holds the M2 money?  
I hear the rich 1% are getting richer and the poor 99% are getting poorer.
Inequality is getting greater.  
More homeless, debtors getting deeper into debt, working poor who barely make ends meet.
Prices are low because they cannot afford good stuff so they buy cheap stuff.
Rich people siphon off money into Ukraine corrupt politicians who buy elections for Democrats and help make the rich richer.
Money drained off to corrupt overseas cannot be spent in USA so prices stay low in USA as poor buy cheap stuff.
Drugs get made, grown in Mexico, Afghan, etc. so $ drained off into those countries.
Illegals send money back to Latin America, never to be seen again, or spent on USA products so prices stay low.

2.  Derivatives, swaps, futures, options are more liquid than M2 money.
Banks can send billions of dollars around the world in less than a second with very little accounting.
Derivatives are in the quadrillions $ dwarfing the few trillions $ in M2.
USA wealth can be drained overseas and not spent in the USA 
keeping inflation low,
and forcing defaults on loans that cannot be repaid because the money has disappeared overseas.

3.  Once money has drained overseas it can be converted into Ukrainian currency, Russian currency, Chinese currency, Mexican currency, etc.
 It can come back to USA by military arms sales, art, 
Miami condo sales, San Francisco house sales, NYC, DC real estate, etc.
college educations for corrupt elite offspring, etc.

4.  Money can also disappear into cryptocurrency, bitcoin, gold, etc.
Largely untraceable and unaccounted for.

There are huge issues involved.
I think the reported statistics are less and less able to explain what is going on.
Too much is not reported.
I believe deliberately.
Vast corruption and criminality.
I have been closely following the statistics since 1966.
I can no longer figure out what is going on.
I would have to move to the East Coast and attend lots of meetings to get up to date.
That may not be enough.
So I nearly give up.
Retreated into solving math problems.
Math is always right.

I saw Greenspan interviewed after the 2008 crash.
He said nothing in his experience or education indicated to him that a crash was imminent.
He may be right.

I tend to think a big crash is coming.
Maybe a civil war.
Huge debts piling up such as in California that cannot print money.
CalPERS may go bankrupt.
CalSTRS may go bankrupt.
If Facebook Twitter Tesla capital gains do no materialize and pay into California taxes.
Disaster waiting to happen.
Illinois is worse.
Pensions everywhere under attack, 
money needed to increase illegal immigration, opioids from Communist China.

Does not look good.
Just hard to predict due to lack of the data.
Who is conspiring against whom?
Where is the money?

From: "Kaufman

Hi Joe:

Did you see the Squawk Box presentation by Alan Greenspan this morning? 

Very enlightening. 

Seems that he is the last of the "Monetarists" and gave a very sobering talk about Trump meddling in the Feds Business. 

I have always admired him because he has a record of being correctly tuned into the economy. 

Had an interesting comment about the debt and money supply, with a warning of things to come 

Seems the tariffs are key, and are leading to some dangerous issues. 

I take it that we are at a max level of no inflation without an increase, 
and continued increase in debt 
with money supply doubling will eventually come to haunt us.

 I have been watching M2. 

Seems that he is right. 

Take a look at M2. 

What do you think?


WASHINGTON — In the summer of 1999, the Federal Reserve chair, Alan Greenspan, had a strange conundrum on his hands. 

Unemployment was low, and companies were profitable. International risks that had prompted the central bank to cut interest rates three times in 1998 had faded from view.

 Yet inflation, which the Fed is charged with stabilizing, remained subdued. 

"What we have now is clearly an ambivalent set of circumstances," 
Mr. Greenspan said at a July policy-setting meeting. 

"We are getting a very dramatic acceleration in aggregate demand, but we are not seeing the usual effect in prices." 

Fast forward 20 years, and today's Fed could soon face a strikingly similar situation. 

Officials cut interest rates for the third time this year on Wednesday,
part of an effort to inoculate the economy against any harmful fallout from President Trump's trade war and slowing global growth. 

The 2019 interest rate cuts have been modeled,
 in part, on Mr. Greenspan's 1998 cycle.

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