MOGAMBO GURU: Empires Do Not Always Die Gracefully

[Tace]

Richard Daughty, the angriest guy in economics
email: [e-mail]

-- I made a solemn vow to sober up, and this time I really mean it, when I read that Total Fed Credit did NOT, again, climb, it did NOT, again, remain constant, but last week it went down by $3.2 billion! Naturally, I assumed that my bloodshot eyes are deceiving me or that I have finally killed the few remaining neurons in my brain that still work. Can this slowdown in Fed credit be true, and I can get back to a life of drunken dissolution with a clear conscience? Time will tell.

And what is the significance of Fed Credit? Because this is the magical and fabled Money From Thin Air, which the Fed, by merely pushing a button, distributes to banks, which use it to make loans, and when the bank makes a loan, real money is thus created, not from thin air, but from the increase in their reserves, which came from the increase in Total Fed Credit, which you realize DID, if you have been paying attention, come from thin air. So, without all this new money from thin air, the money supply has, umm, stagnated.

Mark Lundeen, a guy who literally drips data, sent me a graph showing the growth of Fed Credit since 1938. Back then, even after that arch-communist FDR was installing the socialist state in America, it was about $10 billion or so, and it was gradually rising and rising, faster and faster. Somewhere in the middle 70's, it finally grew to $100 billion, but it kept on increasing, faster and faster. Then, coinciding with the horrid Alan Greenspan being appointed as the chairman of the Federal Reserve, it really got going. Now it is at $783 billion.

Sure enough, when we take a look at the money supply, as measured by the M's, we notice that they all fell, too, although for reasons completely different than why The Mogambo fell down, which was because I was going to unsteadily go over and finish off that bottle of tequila so that I would not be tempted to drink it. But the money supply probably fell because of a lot of reasons, mostly because more people were paying off their loans than were taking new on new ones. It was nothing to write home about, but it does merit the kind of attention that one pays to small clouds on the horizon, knowing that small clouds can grow to big clouds, and then suddenly you get pelted by wind and rain and your new portable radio gets all wet and is ruined, and nobody wants THAT! So it pays to keep an eye on these damn clouds.

(more)

http://worldnewstrust.org/modules/AMS/article.php?storyid=736

[fertilizeonarbusto]

1. Long but VERY interesting. Check out these four parragraphs:

"And speaking of wages, the Labor Department reported last week that 274,000 jobs were created in April, although a close reading of the data shows that most of them (257,000 of them) were assumed to have been created (like the Federal Reserve creates money, out of thin air), as an expedient to make the numbers look good, as all government statistics are now massaged to make the government look good. But maybe there were more jobs created, as the Bush administration came up with another request for another $80 billion for their empire-building in Iraq and Afghanistan and all that money has to go somewhere.

But, then again, maybe not, as first-time claims for jobless benefits rose 4,000 last week to 340,000, which is waaayyy over 300,000, which used to be bad news ("As long as first-time claims stay below 300,000, then it is okay!"), but is not even mentioned in polite company anymore.

Moreover, the Labor Department also reported that factories eliminated 6,000 positions, on top of the 7,000 that were shed a month earlier, which probably explains part of the reason why the index of New York state manufacturing surprisingly fell this month. The index is now at the lowest level since April 2003, ending two years of growth in that particular index.

But even without wage gains or employment growth, some consumers apparently found a way to justify going farther into debt, and so consumer spending went up 1.4 percent in April, and is actually running at a stronger pace in May. The really interesting part is that some retailers mentioned that the number of transactions declined, but that each customer bought more. Hmmm." (end quote)

HMMMMM Indeed. Am I the only person besides the Mogambo that's been suspecting for a while that the Bushies are cooking vital economic stats?

[orwell]

3. Cookbook

It's not just the Bushies. The stats have been cooked for years. Look into how the PCE and CPI are calculated. Phony low inflation numbers increase real GDP and productivity.

The economic stats have become political fodder rather than data points.

[whistle]

4. This imaginary jobs gains reporting is a complete rip-off .....

...."And speaking of wages, the Labor Department reported last week that 274,000 jobs were created in April, although a close reading of the data shows that most of them (257,000 of them) were assumed to have been created (like the Federal Reserve creates money, out of thin air)".

There is no basis what-so-ever for government statistics to assume such a gross provision of new jobs. What, a person gets laid off, collects unemployment until that runs out, then is forced off the unemployment rolls and begins going door-to-door offering to cut peoples lawns for $10, so government assumes that is a new business start-up that creates five new jobs, because this entrepreneur will pay salaries out of that $10?

Several months later, the stats are quietly adjusted downward, but new data comes out and is more exaggerated then ever.

[whistle]

2. This one's a keeper....KICK