The Pankian Metaphor wasGoodbye to USENET 3005

This is true.

From 1997 until present the standard money equations haven't been holding true for the US economy.

Normally, the sum of money, M3 1 is rougly equal to GDP + inflation. Strictly, it is the first order derivate that is measured. 2.

Since 1995 M3 has roughly doubled, but inflation is almost non-existant, and GDP has only increased by a third.

1 M3 is the sum of all the existing money, as cash, and as bank or fund deposits. It is the best available indicator to how many US dollars actually are in movement.

2 Almost all economic enbreasties are very difficult to measure as absolute numbers, but their rates of change is a lot easier to measure. Therefore all formulas that lead to end of policy use the first or second order derivates as indicators.

Now, the FEDs will stop publishing the M3. This is a bad move. It means that the #1 monetary indicator is suddenly kept under wraps.

At the same time Euro trading keeps creeping in everywhere. This week Iran will start trading their oil in Euro, and the indicators of Euro holdings keep creeping upwards.

When we investigate the M3 we see that it has been plagued by measurement problems for a decade. This is caused by a total change in its structure. The eurodollar part has shot up radically1. The steady decline of M3 as a part of all debt has been reversed in the period.

All of this means there is a hole in the US money supply of around a fifth of it's total value that is held up by duct tape and scaffolding.

All available indicators point to Japan, Korea (south) and China (all of it) as the source of the tape and scaffolding. Japan and Mainland China are notorious for wanting checks and balanced against eposure to such overhangs, so they can absorb huge risks without anyone reacting.

Yes, Amelia, the Communists in China are one of the most important backers of the US dollar. They are acting from pure self interest.

It will have to end. It will raise interest rates in the US significantly.

-- mrr