smugllama/economics

Previously I had noted that the M3 was no longer going to be published... Now we see why this is bad news for us:

"This broadest of money supply measures [M3] had shown a discomforting increase in liquidity, far greater than what M2 was revealing. M3 is growing quite rapidly, with the annual rate of change now over 10%. Prior to the announcement of M3's demise, its growth was in the range of 3 - 7%. Anytime a government agency stops reporting about their goings on, it should raise a few eyebrows. Now we see what happened once the reporting of M3 was killed -- that measure of money supply spiked much higher -- a rate of change that's even greater than 10%+. What makes this particularly egregious is that the broadest measure of Money Supply that is still "officially" reported, M2, and its been flat for 2006. While the Federal Reserve has been reporting rather flat money supply growth in M2, in reality they have been dramatically increasing the cash available for speculation. They have been providing the fuel for the rally, the huge M&A activity, and the explosion in derivatives."

"Saddam Hussein stopped trading his oil for dollars before Iraq was invaded. Iran gets set to open a new oil bourse and futures market that will trade in euros, while Venezuela is said to be mulling over whether to follow suit. Now Russia has joined the bandwagon. Putin announced the creation of a Russian oil and gas bourse along with his intention to convert the ruble into a convertible currency that would be used for the trade. Russia has recently swapped some of its dollar reserves for euros. Together Iran, Venezuela and Russia corner some 25 percent of the export market in oil. If the three countries do away with the petrodollar, this could seriously buffet the US currency, forcing up interest rates, increasing the cost of imports into the US and contributing to an inflationary economy or a recession. [...] At the same time, nations in this region have been exchanging percentages of their dollar reserves for other currencies. In March, following the Dubai Ports World debacle, the United Arab Emirates (UAE) Central Bank said it was considering converting 10 percent of its dollar reserves to euros. Kuwait and Qatar have hinted that they might do the same. The Commercial Bank of Syria has exchanged all its dollar devise for euros following a call from Washington urging US banks to cease acting as correspondents for Syrian financial institutions, ostensibly because of money-laundering concerns. Last month, Sweden cut the dollar share of its $21 billion foreign reserves from 37 percent down to 20 percent, causing the dollar to tumble almost two percent in one week. Sweden's central bank said the switch to euros was an effort to stabilise its foreign currency reserves and reduce volatile currencies. Iran, Venezuela and Russia are hardly on warm terms with the US Government and their proposed flight from dollars is thought to be partially, if not wholly, politically motivated. However, if the dollar value plunges as a result, then central banks around the world will be left with devalued reserves, and may have to start switching as well. [...] If Beijing decided to dump US T-bills perhaps in response to a row over Iran, or more likely Taiwan, the US could find itself in trouble. The question is how far will the dollar dive? If it ever goes into freefall, we may be all in for a bumpy ride ahead."

The Treasury Department website was openly stating that as of January 24th 2006 our national debt stood at $8,185.3 billion.

Yet the US national debt 'ceiling' stands at $8,184 billion - a full billion less. [peaking at a 6 billion overrun. As of 01/26/2006 it stood at $8,190,567,748,779.48] Although called upon by John Snow, congress has not passed an expansion of the debt ceiling and so the US government is now operating in technical default.

Somehow, the Treasury department was able to keep their balance below our national debt ceiling. It actually shrank.

01/31/2006 $8,196,070,437,599.52
02/01/2006 $8,183,138,191,456.56
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Debt fell by $12,932,246,142.96

Where did we get $13 billion from? Is this going on our National Visa card?

According to Senator Chuck Grassley (R-Iowa), who as Finance Committee chairman will manage his chamber's debt-ceiling decision, said last week that the debt limit would not come to a vote until March.

There's that month of March again. That's a full month away.

This is now the fourth time since President Bush took office that we will raise the limit on government borrowing authority. In total, the Bush administration has presided over a $2.23 trillion spike (37% increase) in the government's credit limit.

According to Free Market News, "The government expects to borrow a record $188 billion in the January-March quarter, even more than it anticipated three months ago, the Treasury Department announced Monday." -- Another way of saying it is that we're going over budget at a rate of $23,397 per second.

Check out these last four years:


Update: As of 02/02/06, We're over the ceiling again by $14 billion again.

Update: We now know where the money is coming from:
Retirement Fund Tapped to Avoid National Debt Limit
"The Treasury Department has started drawing from the civil service pension fund to avoid hitting the $8.2 trillion national debt limit. The move to tap the pension fund follows last month's decision to suspend investments in a retirement savings plan held by government employees."

Homeland Security To Confiscate Bank Safe Deposit Box Contents: Bank of America & Compass Bank Managers Were Told Homeland Security Will Confiscate Safe Deposit Boxes

"...members from the Homeland Security Office who instructed them on how to field calls from customers and what they are to tell them in the event of a national disaster. She said they were told how only agents from Homeland Security (during such an event) would be in charge of opening safe deposit boxes and determining what items would be given to bank customers. At this point they were told that no weapons, cash, gold, or silver will be allowed to leave the bank - only various paperwork will be given to its owners. After discussing the matter with them at length, she and the other employees were then told not to discuss the subject with anyone."

"On a trip to my bank here in Houston, I remarked to a young bank employee (who's new there), "well I guess you've been told all that stuff by the manager and the Homeland Security about what to tell your customers" - and to my amazement, the young woman came right out and said yes she'd been through all that, then whispered to me across the counter, "but we're not supposed to talk about - I could lose my job."

An interesting perspective on some of the possible outcomes of our present "crisis" with Iran. Lots on the upcoming Iran oil bourse and its possible economic impact.

"Thirdly is the role of the petro-dollar in propping up a decrepit US economy and moves by Iran to setup its own oil bourse in March. We should remember that in 2002, Iraq switched from selling its oil for dollars to euros, a move that the US simply couldn't accept. ... To understand the centrality of the petro-dollar to US economic hegemony (backed up of course with overwhelming military force), we have to understand how important the petro-dollar is to US economic power. ... Over the past four years the value of the euro has appreciated by 13% against the dollar making it a preferred currency to sell oil with, hence Iraq's switch to the euro in 2002 and the upcoming establishment of an Iranian oil bourse based on euros which presents a direct threat to the power of the US dollar. Add to this threats by Venezuela to trade its oil in euros and in spite of the US's military supremacy, the US economy is in serous trouble if Iran and Venezuela go ahead with the switch."