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12/04/2006 Archived Entry: "Inflation is 10%"
INFLATION IS 10%
Inflation of the money supply is the real inflation, not the increasing prices that invariably follow inflation. Governments and their media apologists like to call price increases "inflation" because they can then manipulate the contents of a hypothetical basket of goods to produce soothingly low numbers.
The fed stopped reporting M3, the broadest measure of money, early this year. Many knowledgeable people wondered if the intent was to conceal fed actions. It appears it was. John Williams has reconstructed M3 in his meticulously researched Shadow Government Statistics. M3 growth was 3-7% per year before the reporting stopped; now it is nearly 10%. If you follow the link, you'll see that growth in M2, the broadest remaining official government statistic, has been flat while M3 exploded.
The news gets worse. The New York Post's John Crudele reports that the US Treasury is now duplicating the feds power to create money out of thin air. Using "repo agreements," the Treasury, now headed by a former Goldman Sachs chairman, is creating money and credit at an astonishing rate.
Central banks are a bad idea but in pretty much every country, the central bank and its money-creation power is at least symbolically independent of the government. Once the politicians seize the power to create money, they will do so. They are doing so.
I don't know how this will end, but my estimate of the chances of a colossal crash or hyperinflation has gone up. All of this newly created money is already fueling increases in the price of hard assets: gold, silver, mines, fine art, large corporations, anything but the increasingly worthless paper dollar.
Posted by Silver @ 04:31 AM CST