It's the Money Stupid

By: Joseph Russo | Sun, Oct 24, 2010
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Part-I Game Over

Dazed and Confused
Why did the stock market crash in 2002, and then again in 2008?
Why has the value of real estate declined so much since 2007?
What has happened to the economy?
Why do stocks continue to soar in the aftermath?
Why does Gold suddenly cost over $1300 an ounce?
Why can't we get a loan?
Have we hit bottom yet?

Back in Black
Wall Street seems to have hit bottom nearly a year ago. On the back of an 11th-hour bailout by Main Street, Wall Street is enjoying a rather bountiful and robust V-shaped recovery.

Meanwhile, Main Street struggles with frustration, anger, and envy. How could this be justified? After all, Main Street bailed out Wall Street. Without Main Street, Wall Street would have collapsed, right? Why is this?

That's the way, uh huh, uh huh, they like it, uh huh, uh huh
Suddenly, Wall Street is back on its high horse once again looking down upon the peons of those residing on lowly Main. Why has Wall Street recovered, while Main Street continues to lag?

How has all of this happened?


Why are things the way they are?

Should one posses the tenacity to persist after taking the first few steps in quest to answer such a sophomoric question, they will soon reach the proverbial brick wall.

Along the arduous journey in attempt to reconcile civilizations historic and current state of economic and social condition, one will quickly abandoned the task, concluding it impossible, and teeming with global economic complexities alongside an overabundance of geopolitical, ideological, religious, and philosophical nuances.

Like many of you, we too have attempted to take this historic journey in search of some sort of an answer. We are sorry to report that we too have arrived at the similarly frustrating proverbial destination. Definitively answering the question is impossible. However, one need not walk away from such a query completely empty handed.

The most satisfactory observation we took away after persisting to drill down for possible answers was recognizing four fixed elements repeatedly surfacing the further down we continued to drill.

In our view, these four underlying elements appear to consistently serve as the lowest common denominators amidst the growing legion of intractable imbalances and ideological nuances surrounding the very basic but still largely unanswerable question, why are things the way they are.


Is that which we commonly refer to as "money" a big part of the answer?

Along our continuing journey, the four common denominators that consistently rise to the top of our drilldown list are:

  1. Central banks
  2. Large government bodies
  3. Money
  4. And concentrations of immense projectable power

In our view, these four elements repeatedly appear as the most probable origins of underlying causality in partial answer to the perplexing question of why things are the way they are.

The most common of the four, which affects people every day, is MONEY.

Backed by nothing beyond faith, confidence, and the fiat decree of ruling imposition, the monopoly manufacture of fiat currency (MONEY) is the spinal cord of power amidst a wide-ranging arsenal of alchemist-like schemes that are available to perfect the interventionist mandates of central banks.

Effective propaganda in concocting such tools on an ad-hoc basis enables a concentrated collective of structured powers to preserve their respective dominions.

Should the tool of MONEY, which in theory we all rely upon to exemplify all of humankind's virtues, be vulnerable to such egregious manipulations?


So you think Money is the Root of All Evil? Think some more…

The list of alchemists' tools contrived by central bankers is limited only to their academic wit and innovative imaginations. Sanctioned by ruling governments, they are bar far, the most powerful and crafty entities on the face of the earth. Together with governments and powerful special interests, their collective actions of concerted self-preservation have a profound effect on our lives, and those of future generations.

The very existence of such omnipotent central banks and power structures are in and of themselves third-rail topics requiring intense public debate and scrutiny.

Perhaps if we can ascertain why such concentrated and dominant monopolies need to exist in the first place, we can then begin to assemble a short list of plausible answers as to why things are the way they are.


Three strikes and you're out

No one can seem to stop talking about QE-2, or the second round of quantitative easing by the American central bank.

Easing, quantitative easing, tinkering with interest rates or drafting special legislation with earmarks, call it what you will, but it is all the same to us.

All of these actions are centralized command and control interventionist manipulations engineered to subvert and control the free market. Technical definitions aside, for the purpose of this nonprofessionals' presentation, we cite prospects for the highly touted forthcoming intervention as QE-3.

Back in May of this year, we constructed a dual paneled chart graphic to observe the effectiveness of such interventions relative to the volatility expressed in the price behavior of equity indices. That chart consisted of a monthly volatility index in the top panel, and the relative trajectory of the Dow Jones industrial average in the charts lower panel.

We presented the chart and our opinions as to its potential implications in an article entitled The Fix in the VIX. We began the article with the following:

"To measure the ongoing success or failure of massive QE "working groups" interventions, all one needs to keep an eye on is the VIX. Readings below 20 suggest, "The FIX is in", whereas readings above 20 diminish the mission control effort to reflate monopoly-saving bubbles."

A little more than a year after our money-masters-of-the-universe shrewdly averted an outright global insolvency, many investors remain utterly baffled as to how stocks can sustain a raging bull market amidst massive outflows in concert with such dismal long-term structural imbalances.

Those in the nonprofessional category may find some clarity in our placing a concurrent price chart of the "flexible" $USD into the updated price panel mix. This simple graphic should go a long way in helping to explain the otherwise perplexing bull market, or QE hyper- reflation conundrum.

Forthcoming, the chart in Part-II (extra innings) provides an update to our last, and includes an additional third panel illustrating the value of the US fiat currency unit, or "MONEY" as it were.

Until next time,
Trade Better/Invest Smarter

 


Our client based screen cast publications include coverage of all the major US markets. Each screen cast includes an abundance of charts, details, guidance, as well as access to our proprietary programmed trading systems, which are engaged in the markets amidst every timeframe imaginable. In celebration of our Fibonacci fifth year of service, we are offering a phenomenal 62% first month trial discount to all new subscribers for the balance of 2010. From any of our order pages, enter the Coupon code: NCC-1701 and your first monthly or quarterly charge will reflect the trial discount.

 


 

Joseph Russo

Author: Joseph Russo

Joseph Russo
Chief Editor and Technical Analyst
Elliott Wave Technology

Joseph Russo

Since the dot.com bubble, 911, and the 2002 market crash, Elliott Wave Technology's mission remains the delivery of valuable solutions-based services that empower clients to execute successful trading and investment decisions in all market environments.

Joe Russo is an entrepreneurial publisher and market analyst providing digital online media solutions designed to assist traders and investors in prudently and profitably navigating their exposure to the financial markets.

Since the official launch of his Elliott Wave Technology website in 2005, he has established an outstanding record of accomplishment, including but not limited to, ...

  • In 2005, he elicited a major long-term wealth producing nugget of guidance in suggesting strongly that members give serious consideration to apportioning 10%-20% of their net worth toward the physical acquisition of Gold (@ $400.) and Silver (@ $6.00).

  • In 2006, the (MTA) Market Technicians Association featured his article "Scaling Perceptions amid the Global Equity Boom" in their industry newsletter, "Technically Speaking."

  • On May 6 of 2007, five months prior to the market top in 2007, though still bullish at that time, he publicly warned long-term investors not to be fooled again, in "Bullish Like There's No Tomorrow."

  • On March 10 of 2008, with another 48% of downside remaining to the bottom of the great bear market of 2008-2009, in "V-for Vendetta," using the Wilshire 5000 as proxy, he publicly laid out the case for the depth and amplitude of the unfolding bear market, which marked terminal to a rather nice long-run in equity values.

  • Working extensively with EasyLanguage® programmer George Pruitt in 2010 and 2011, the author of "Building Winning Trading Systems with TradeStation," he assisted in the development of several proprietary trading systems.

  • On February 11, 2011, he publicly made available his call for a key bottom in the long bond at 117 '3/32. Within a year and half from his call, the long bond rallied in excess of 30% to new all time highs in July of 2012.

  • For the benefit of members and his general readership, he responded to widespread levels of economic and financial uncertainty in the development of Prudent Measures in 2012.

  • He publicly warned of a major top in Apple on October 26, 2012 in the very early stages of a 40% decline from its all time high.

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TRUE MONEY SUPPLY

Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/