The Fed - Picture of the Day

Here’s another good article from that may help explain why the dollar was recently looking stronger vs weaker, as you’d expect with all the $ being pumped into the system. They believe that it is a symprom of massive deleveraging and unwinding, not an indicator of deflation.


Forgive a dumb question, Chris, but where are the numbers coming from for this graph? How do we actually know how much money is being released into the system? During what period of time did that huge spike happen? Thanks much.

No, it’s not a "dumb question." What Chris doesn’t make clear here is that the graph shows Total Consolidated Assets of the 12 Reserve Bank balance sheets, not the aggregate supply of money or debt of the US government. What the spike likely respresents is the recent "Open Market" action of the New York Federal Reserve in purchasing T-bills from the largest commercial banks. This action increases money stocks and floods the markets with liquidity. He attempted to explain this "action" in one of the Crash Course episodes.

Go here –>

and then explore under the "Policy Tools" tab on the left.

The extreme spike reflects the global magnitude of the current problem.

True, the market price of gold has modestly gone up, but various forms of "short selling" and "short sellers" are intentionally suppressing the price. If the shorting went away, the price of both gold and silver would explode. The core reason for the short selling is the concerns of the Western World’s central bank system that gold and silver will make a resurgence as a rival monetary system. Figurately speaking, the central banks have locked the fire exits to a burning building. NO ONE ESCAPES! Got it?

"…and that no one may buy or sell except one who has the mark or the name of the beast…" Revelation 13:17



Hey pongssw,

I regret to inform the group that I am unable to use the "swamp of bees" metaphor due to the colony collapse disorder that has been happening in the real world. I recommend the use of fire ant behavior during a flood.


I don’t follow you, Dr. McLoughlin. I was not attempting to daunt people with a doomsday scenario. Realistically the scenario may be daunting and the problem too deep. But shouldn’t we try to solve the problem, the right way, regardless of how long or hard the effort may be? I was not an economics major but a philosophy major. I tend to aim directly to the root cause of problems even if they seem too deep to grasp.

Are we blogging just to blog and get things off our chest? That’s well and good, but if there is no long term effort in solving problems, then endless complaining and/or lecturing about problems will be futile. Thanks to all who have provided information so that we may have more tools accessible for attempting to fix the problem.

My responses are long and drawn out and I’m sure your comment was just in jest but un/forntunately I take everything, especially now, seriously. I fear for my son’s future, in that, his will be full of debt, war, and misery that was willed to them by his previous generation. I have this sense that everyone around me has given up. It seems as though we’ve lost our own will to do the right thing because the right thing seems too distant or too naive. Are we all becoming nihilists in some sense? Has capitalism turned into a failed state of supercapitalism (~the negation of capitalism) and competition turned into greed, first come first serve, and dog-eat-dog world? That is not the world I want my son to face. He is so happy, so smart, so enthusiastic, so energetic, so focused, so motivated, so alive right now. For me to think what will "sober" him up, is our legacy to him, is criminal and shameful.



When currencies were backed by gold, the overall global money supply was multiple times lower than it is today. Without causing mass devaluation in currencies, wouldn’t they have to switch to something that’s more plentiful yet still rare like Silver to accomodate the change in overall global money supply?

I suspect that you have done what you can to live a moral and decent life, Caroline. It is no fault of yours (or mine) that our system is corroding and that we have been failed for decades (a la Chris’ teachings) by those who "represent" us. The world has always been an uncertain place and my 26 y.o. son is going to have to make his way in it the best he can, without me for most of it, as will yours. We give them access to info, solid emotional upbringing to develop personal resources, and encourage them to associate with like-minded folks. I don’t think there’s much else you can do. If a Mad Max scenario develops or some other decline in social organization (seems possible, no guarantees, look at the Romans), they will need to be even more resourceful. Money and some knowledge of how to take care of yourself in a physical confrontation are not bad things either, IMHO, to bring it to the basic level.


I guess people will get a variety of things from this blog…info, a chance to ventilate, a sense of community, who knows?



I don’t agree with Clive Maund some of the time and I think his views can be quite extreme. But then again, we are living in extreme times and there is no doubt that the crisis we’re facing is worse than anything this country has yet encountered. Clive had this to say in a recent newsletter:
"both men and women are encouraged to work long hours and coerced into accepting work with virtually no vacation time, and a sizable proportion of their free time is eaten up by bureaucratic concerns, such as paying bills etc. With what little time they have left they are often too fatigued to do much else and end up doing something like watching a movie. The long working hours and lack of vacation time also mean more profits for the politicians’ pals and associates in the business world. Another technique involves what is called atomization in order to undermine the sense of community and the empowerment that a sense of community brings. This is achieved again through distraction, the principal weapon being the television, but also trivia such as video games. A simple example of the way this works would be a person choosing to stay home and play a video game rather than going to have a chat with a neighbour. Still another important technique employed is obfuscation - making it hard for ordinary citizens to connect them with particular actions by acting as a group or through intermediaries. Perhaps the greatest factor contributing to the concentration of power and impending end of democracy in the US however is comfort. The majority of citizens have lived comfortable, affluent lives for many decades. This has led to unquestioning trust in politicians and a "leave it to them" attitude. Many people have more important things to do than keep tabs on what their politicians are up to, such as watching the ball game, drinking with their pals or going to the racetrack."
I agree with him on this. Most Americans are stuck in a consumer trance. They’re working long hours to support a lifestyle they cannot afford and buy things they don’t really need. Their primary concern is figuring out how they can sustain this unsustainable arrangement, because from the time they were born it was packaged and sold to them as the "American Dream".
The irony is that, although people are primarily engaged in an effort to preserve this lifestyle, studies show that they are actually unhappier as a result of it. This reminds me of how monkeys are trapped in certain places. Trappers make a trap with a banana inside of it. The monkey comes along and puts his hand in the trap and grabs the banana. As long as he’s holding the banana, he can no longer withdraw his hand from the trap. One would think the monkey would just let go and walk away. However, in general the monkey will not let go of the banana and will therefore remain trapped.
Most of us are monkeys in this respect. I don’t mean to be flippant or cynical in saying this. Rather, I’m acknowledging the fact that most of us are actually addicted to our current lifestyles. And, like many addicts, most Americans are in complete denial about their addiction and its consequences. This is the real reason why so few people stay stuck in the consumer trance and are unwilling to accept the reality of the "three Es".

S.G., I have not done everything I can to lead "a good life" I learned this too late in life. Better late than never, but… Everything that happens in the world, good or bad, has been because of my triumphs or faults. I have a fractional part in everything that happens around the globe. I may not have a huge part it "the system" but I will not delude myself or displace blame upon others. I am to blame as well as the Enron CEO. Our blunders may not weigh the same but are on the scale nonetheless. All I’m saying is that I learned about ethical behavior too late in life. I wasn’t born ethical and had to be taught in college. I was taught little by my parents but not systematically or theoretically as it should have been. I guess I wouldn’t call that teaching since their explanations were the authoritarian response of "because I said so". I know the surface problem are what grabs most people but I truly believe the fundamentals must be examined in order to understand the surface issues. I grew up Catholic but currently do not hold any religious beliefs. I don’t want to introduce religious morality into my argument and believe that secular, ethical teachings are necessary and should never warrant any type of religious opinion.

I agree, this is a great place to vent and obain a sense of community.

I don’t like the idea of settling. I think we cop out when we say we do the best we can but really don’t do what we say. When we do the best we can, I think we’ll know. Right now and so much of our recent past, ALL OF US, should have been marching in the streets to protest the "bailout". Most of us didn’t. I don’t think we did the best we could. It’s easier to sit here doing this, i.e. typing to you or watching t.v. (which I do not) instead of getting together and demonstrating on the street with our Constitutional Right to protest! We have become an obese, fast-food, t.v. watching, myspace, prescription, diabetic, facebook, World of Warcraft, Playstation, Hollywood, and a debtor nation. If the pharmeceutical and advertising industries are the top two industries of the world/nation, then those industries are the most successful and bring in the most profit. What does that say about us? That is what scares me about this country.


I should also mention that I am 34 years old. I live in a very progressive community (Berkeley, CA) and have a group of friends that are very socially and environmentally conscious. However, even within this group there is a shocking lack of awareness about and responsiveness to the current crisis we’re facing. This is not because these people are unintelligent, and they are definitely not in the mainstream consumer trance I described in the previous post.
The problem, I think, is that many of them are struggling to get by as things are. The last thing they want to know is that it’s going to get even harder. That’s a really painful thing to take in, and I think many just get overwhelmed by the pain in that and they go into denial. This is a natural and predictable response to pain, and as I’ve mentioned elsewhere it has been written about by authors like Kubler-Ross in the context of being confronted with something like terminal illness.
So, how do we encourage people to accept this pain and move past the strategy of denial? We really need to figure out a way to do this on a personal, local, national and even global level. Of course, at some point if things get bad enough denial simply won’t be possible. But I sure would like my friends and my country to respond before it gets to that point. I wish I had faith that they would.

Given industrial demand, and reduced efficiency of mines, some claim silver is actually in shorter supply than gold.

Unrelated, gld the etf that hold gold in a vault has had higher than normal volume lately…people buying and selling. I understand the buying, but I can’t understand why anyone would be selling given the news.

Hi Karla659-

Sorry! The response I gave to judithkatz today, 10/08 ,at 00:05 was meant for you, karla659!  That's what I get for trying blog  after midnight!

Anyhow, I think I've learned a little more since then that I can add.  Per Chris's current article "Central Banks Cut Interest Rates", the problem was not liquidity, it was solvency.  I believe Nouriel Roubin of says the same thing.  So the analogy I gave in my earlier response, of the the economy being like a plane crashing, may not work because it is based on the assumption that the problem iwith the economy was not enough liquidity!


That is one hell of a spike - is that the new $700Bn payoff? If not then WOW!!

The film The Money Changers talks about the need to close down the Fed and create a new currency as Lincoln did, the Greenback. How would that scenario look in today’s world? As I understand it, Congress would have the right to print money, as stated in the Constitution, which sounds encouraging, but how would this affect the value of say… our houses?