M3 Reporting: Whats The Big Deal?
"I envy paranoids; they actually feel people are paying attention to them." -- Susan Sontag 1933-, American Essayist
In the last few weeks a flurry of articles have emerged all screaming that the world is ending because the Feds are going to stop publishing the M3 figures; what a bunch of boloney is our response. Its typical mass behaviour, react after the poison has been injected into the system and head for the steep cliff that is waiting just around the corner. Not once has anyone bothered to ask the million dollar question; does it really matter how fast or slowly you die once you have been poisoned? The only thing that matters is that death is certain; the time and speed of death are totally irrelevant facts and only serve to add more pain and misery to an otherwise bleak situation.
Before we go any further lets look at two charts
This chart goes back all the way to 1959 and it shows that for a few years M3 increased rather slowly but nevertheless it did increase. In other words the money supply was being inflated even though it was occurring at a much slower pace; the poison was already in the system. From 71 to 80 the pace of inflation more then doubled. Now let's zoom in.
If you compare the 1980-2005 period to the 1959-1979 period; the chart has essentially gone ballistic. The printing presses were being run by crack heads but that does not alter the fact that the poison first entered the system decades ago. In other words the system was going to die the only variable being the actual time of death.
Let's stop here and look at some other interesting facts.
If one subtracts the M3 from M2 one will notice that this amount kept increasing while the percentage of M1 actually decreased from the end of the 70's. This indicates that for every dollar in actual currency there are over 10 dollars of electronic money; rather strange don't you think. Another strange factor is that most of the actual real (it's an oxymoron because the term should be dead) dollars were held in countries outside the US; in other words the US actually is loaded with nothing but electronic dollars.
So now all the piper pipers and the rats from Hamilton are running out stating the world is going to end and that one should run and buy gold and other precious metals to protect oneself. Excuse me you should have been protecting yourself the day the system was poisoned in the first place. The only thing that has changed now is that one will no longer be provided with data to indicate how much new poison is being injected into the system.
If you notice for the last 2 weeks or so there have been rather high powered moves in Gold, Platinum and Silver; the only one that was truly justified was the move in Palladium. We had a similar situation occur in Oil, hurricane Katrina and its sisters arrived and delayed the correction of oil and instead oil rallied even higher (much higher) but however in the end it seems that the news was priced in with that move and oil then proceeded to correct. Once again paranoid gold bugs should read our statement before writing in and screaming at us. We are not talking about a crash; everything that goes up must correct a bit to build more energy for the next phase. Even in the crazy hyped dot com mania we experienced huge corrections along the way up. Patience is key here nothing happens overnight the biggest time to have been loading up in Gold bullion was late 2002 and parts of 2003 and when Gold pulled back to the main uptrend line (the 380 ranges) in April 2004.
In actuality the FED has been printing money like hell for decades and Gold hardly reacted; it only started moving recently. So the fact that they are not going to publish this data in a way is redundant since everyone with a brain knows there is no way in hell the Fed is ever going to stop printing money; in fact they will continue to do this till the very. So what's going on here? It comes down to fear the masses are letting fear run wild. It's funny when the Feds were busy debasing the currency at the speed of light and publishing this data no one cared but now that they won't tell you how fast they are destroying it everyone starts to worry. What a bunch of fools is all that we have to say to those who fall under this category. Here is something else to consider what makes anyone think that they were ever publishing the right figures anyway. They control the data so they could for all intensive purposes just put in any figure and print several hundred billion more dollars. In fact we think this is what has been happening all along. Jim Rogers shares this way as he basically states all government data is manipulated and he is one very astute investor. Its human nature to want what one cannot see or what one can longer have anymore. If a glass contains poison no one asks the question is the poison in there enough to kill me or not? The moment poison is mentioned everyone flees. Hence worry not about the speed of currency debasement but the fact that they were ever allowed to debase our currency in the first place.
Gold, Silver, Palladium etc will always be good investments; however for those who are not loaded to the gills with money one has to time ones entries as there can and will be hard pull backs on the way up. In the long term we are still bullish in the short term to intermediate time frames we are cautious and have been for much of this year. Instead we focused on Palladium which is up over 50% since we started taking positions. Bottom line; don't waste time worrying about something just because you can no longer determine the rate at which the poison is being administered. All you need to know is that the poison is still being administered in lethal doses and hence taking appropriate measures to protect yourself is what you should be focusing on. Deal not with the symptoms but with the root cause of the problem.
"Stubbornness does have its helpful features. You always know what you're going to be thinking tomorrow." -- Glen Beaman
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