EZ READING MONEY MATTERS: We Rain On Mr. Sunshine's Parade

August 27, 2008

Elaine Meinel Supkis

I have to go out and fix a roof today so this is a quick story: Mr. Sunshine is an economist who says some very dumb things at Seeking Alpha. I and other readers tear him apart. Fun times, go enjoy. Also, we notice that our anger about the ending of the M3 data was correct, the news about the global monetary system still shows the collapse continuing. Even as commodity inflation fades temporarily, the underlying trade mess still continues. The US saw its trade deficit fall but this was 100% due to the weakening dollar. The cost of this fall in imports was very, very high: we paid through the nose for oil. Everyone in America is significantly poorer thanks to this.

First, Mr. Sunshine Man attacks the heros who struggle to keep the M3 data going despite the criminals at the Federal Reserve hiding this information:

Mark Sunshine at Seeking Alpha: Prominent Economists Make Up Data That Doesn't Exist

Many so-called “prominent economists” in the United States and Great Britain were late to understand Federal Reserve monetary policy and are now covering up their past incompetence by making up data and presenting it at as both authoritative and accurate. The issues surrounding the destruction of money supply as result of the credit crisis were obvious but often ignored during the second half of 2007 and the first half of 2008.

Despite having the Great Depression’s monetary history as a guide, many economists that were critical of Federal Reserve policy in the international media didn’t bother to think before talking. These economists didn’t understand that the Federal Reserve’s emergency liquidity facilities were designed to prevent a wholesale destruction of the monetary base and that once the money supply was stabilized, the Federal Reserve could resume its current hawkish stance.

Here is my reply:

This is Elaine Supkis of Culture of Life News:

I was one of the many people who protested very loudly when the Fed capriciously suddenly said, no one needed to see M3 numbers anymore. A number of central banks still publish this data but not the privately-owned Federal Reserve!

When the Fed made that announcement back when we were at the very peak of the housing bubble, oil inflation was just beginning to really take off. I figured, this M3 data was being terminated because Bernanke and Greenspan, as one left office and the other entered, knew that we were on the eve of global hyper-inflation.

And I was right. Immediately, inflation took wing and shot upwards. This is very significant because it happened precisely when asset values of things like properties, etc. began to lose value, rapidly.

A classic situation that M3 helps track was this rapid wealth destruction in assets running during a raging rise in commodities. We saw this in the past like in the stagflation years of the seventies, for example.

We know from history, the only cure for this is to raise interest rates. Instead, now we are 'driving blind' and the first wave of hyper-inflation has hit shore and the next is definitely on the horizon. Until the Fed and the Bank of Japan cease making loans below the rate of real inflation of COMMODITIES, these future inflation waves will destroy the value of global trade monetary icons. Already, the world's #2 economy, Japan, has killed its currency to the point, even the Japanese don't want it anymore.

Now, the #1 economy has set out to do the same. The frightened Europeans are trying desperately to up the value of the dollar but they will fail. Not with both China and Japan, the #2 and #3 economies, flooding Europe with exports or blocking European exports to third parties like the OPEC nations, etc.

For ultimately, none of this is really about monetarist values. It is all about TRADE. With 'free trade' we have a system of 'beggar your neighbor' trade that is extremely hostile and dangerous. The only way the US can get out of this trap is to install tariffs and barriers. This is because we are the world's #1 trade deficit nation. This is utterly unsustainable.

And when we look at debt, trade and monetary policies all at once, we then understand, the 'money creation' business is just a symptom, not a cause.

Also, where does Seeking Alpha find these 'economists'? Mr. Sunshine is pretty close to the bottom of the pit where these poor guys live.

I didn't mention Mr. Sunshine's attacks on the good people who try their best to keep us informed about the M3 information. Other outraged readers tore into him about that. And they are right and Sunshine is a rain cloud. Or cloud coo coo land.

The news this morning clearly shows that the continuing mess is due to the US trying to weaken the dollar so we can increase exports and dampen US appetites for imports. This is a cruel way of balancing trade. Tariffs feed Federal revenues. Whereas a weak dollar kills the consumer and the savers at the same time. We get inflation in import prices while getting no relief with taxes! Our sensible ancestors understood this very clearly. The deflation cycle of the Great Depression spooked economists and politicians to the point, they misunderstood what happened back then and thought, the way to avoid depressions is to have no barriers to trade. This childish ideal is proving to be very bad for the workers in the US which as become the main destination of global exports.

Orders for Durable Goods in U.S. Unexpectedly Gain

(Bloomberg) -- Orders for U.S. durable goods unexpectedly increased in July, indicating growing demand from abroad is still helping companies weather a slump in consumer spending.

The 1.3 percent gain in bookings of goods meant to last several years matched the previous month's rise, which was larger than previously estimated, the Commerce Department said today in Washington. Excluding transportation equipment, orders climbed 0.7 percent after a 2.4 percent increase a month earlier.

Sales overseas have helped U.S. factories withstand the three-year housing slump and tighter lending rules that have caused Americans to cut back. Still, economies abroad are now also weakening, signaling companies will not be able to count on sustained gains in exports.

The ICE raids show that US manufacturing has coped with inflation by bringing in a hoard of illegal aliens and undercutting US working wages. This is why the US has seen no worker agitation for higher wages. The illegal aliens have to be silent or else they get deported. This is the cure for inflation. Like Japan, depressing wages. This depresses the local economy and it is spreading. As the dollar weakens, this hammers worker's buying power and causes all assets purchased by workers to decline in value even as the things needed for survival, food, fuel and medicine, shoot upwards.

This causes a 'hand to mouth' economy to develop and this is a third world economy. Taxes are cut but this worsens the credit rating and the need to pay interest to foreign powers makes the trade situation worse, not better. The cruel methods of dealing with trade imbalances rests ENTIRELY on beggaring the working class.

Lockhart Says Fed's Rate Is `Consistent' With Slower Inflation

(Bloomberg) -- Federal Reserve Bank of Atlanta President Dennis Lockhart said the central bank's interest-rate stance is ``consistent'' with slowing inflation, while signaling readiness to raise borrowing costs if needed.

``Current Fed policy is consistent with an easing in overall inflation given the dynamics of the economy,'' Lockhart said in the prepared text of a speech today in Atlanta. At the same time, ``I am mindful of today's elevated risks and am prepared at any point to change tactics to ensure inflation expectations do not become unanchored.''

Policy makers agreed on Aug. 5 that their next change in rates would be an increase, according to minutes of their meeting released yesterday. A number of officials concerned at rising risks of inflation favored an increase earlier than traders expected, the minutes also showed. Lockhart will vote on rates for the first time in 2009.

The first wave of inflation has passed. The second is on the horizon. We see it pretty clearly. The only tool left to stop this commodity wave is for the US workers to be totally destroyed like the Japanese workers. This takes us to the election this year:

Financial Crisis Is Absent From Agendas of Parties, Candidates

(Bloomberg) -- The U.S. is facing the worst financial crisis since the Depression. You would never know that from the Democrats' platform in Denver or its Republican counterpart, or from listening to Barack Obama or John McCain.

While both candidates have bemoaned the ravages of the subprime crisis, they have yet to spell out steps for tackling it, such as using taxpayer money to shore up banks and housing.

``They fail to come to grips with the biggest danger that is going to hit the next president in his first few months in office: the crisis in the capital markets,'' said David Smick, a Washington-based consultant to hedge funds and author of ``The World is Curved: Hidden Dangers to the Global Economy.''

The born again Christians want no abortions. This way, women will be forced to have children while having declining incomes! Japan's workforce has nearly totally ceased to reproduce itself and is now declining, rapidly. The US will do the same. Neither candidate talks about Japan's policies. This is peculiar but of course, I must be the only other human on earth who is tracking Japan's economy and analyzing its bad effects! I worry much more about Japan than China for obvious reasons: we are imitating the worst aspects of Japan's 'economic miracle'. China is very dynamic. The workforce, quite restive.

Japan is quiet. Dying. Like the older US industrial workforce, the workers there accept all the hammer blows that make Toyota and Sony stronger and themselves, poorer. I am very alarmed about this and seeing unions give up the ghost here is scary. The unions support Obama but he is not a union supporter, himself. He is part of the New World Order. The New World Order is nervous about McCain because his literally insane.

Reagan was a happy, friendly senile old man. McCain is a bitter, angry, ill tempered senile old man. And this is the only major difference between the two AIPAC candidates. But then, analyzing things so they make sense is very difficult. Since tariffs have been removed from the table, it is nearly hopeless, trying to fix things. We can't fix things unless we first understand what is going on. And to do this, we must look into history. And to understand history, we have to stop accepting old chestnuts of wisdom and look for walnuts of intellectual understanding from a new perspective.

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