[ExI] M0 singularity... you're soaking in it

[samantha]

Damien Broderick wrote:
> Look at the chart at the site:
> 
> <http://www.safehaven.com/showarticle.cfm?id=12403&pv=1>
> 
> The author comments:
> 
> <...I can't believe what is happening in narrow money. M0, the narrowest 
> measure, is usually called the monetary base. It is simply currency 
> (coins and paper dollars) in circulation and in bank vaults plus 
> reserves commercial banks have on deposit with the Fed. These reserves 
> are critical because they are the base from which all other forms of 
> money such as checking accounts are created. The monetary base directly 
> controls the ultimate size of fractional-reserve banking.
> 
> Until late 2008, I hadn't looked at M0 for years. Why? Even the Fed 
> isn't foolish enough to change it too much. For decades it has traveled 
> in a tight range between about 2% and 10% annual growth, with a 
> pre-panic average since 1960 of 6.0%. M0 growth less real economic 
> growth is one of the most basic measures of inflation. If M0 grows at 6% 
> and the underlying economy at 3%, then there is relatively 3% more money 
> available to spend on goods and services. This is inflation.
> 
> I was reading a book last month that discussed the monetary base's 
> direct impact on inflation. So I decided to take a look at M0 again. I 
> could not believe what the data showed, I almost fell out of my chair it 
> was so mind-blowing. Per the Fed's own data, we have just witnessed the 
> most inflationary event in modern history. This crazy monetary base 
> chart will make even the most rabid deflationist very uneasy.
> 
> [chart]
> 
> M0 has gone parabolic! Year-over-year in December 2008, it was up 98.9%! 
> This is so shocking it defies belief. In late September as the stock 
> panic started, it had grown by 9.9% over the past year. By October, this 
> rate ballooned to an all-time high of 36.7%. In November, it rocketed 
> again to 73.0%. And in December, it surged up to the staggering 98.9% 
> you can see above. Ben Bernanke's Fed has doubled the monetary base in a 
> single year! Holy cow. >

Yep.  If you have any savings I would strongly recommend:

33% in gold and/or silver;
33% in durable goods (they will be more expensive later) and securing 
your housing as best you can;
keep the rest fairly liquid and easy to get at.  Play some of the market 
chaos if you feel comfortable but always cut losses short and take 
profits when you can.

It is not likely to be a pleasant ride.

- samantha