JOHN WILLIAMS’ SHADOW GOVERNMENT STATISTICS
 
FLASH UPDATE
 
March 10, 2008
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Fed Sets Currency Printing Presses at Full Blast
February M3 Growth at Record 16.8%
 
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PLEASE NOTE: Last Wednesday, I expected the February newsletter would be posted today, March 10th; instead, it now looks like it will be posted sometime tomorrow. Whenever the newsletter is posted, such will be advised immediately by e-mail. Key developments from late last week are touched upon below and are more fully explored in the newsletter.
     The SGS-Ongoing M3 has been updated for 25 to 27 of 29 days of reporting and is available on the Alternate Data Series tab at www.shadowstats.com.
     — Best wishes to all, John Williams
 
The Federal Reserve’s announcement Friday morning (March 7th) that it was increasing its term auction facility (TAF) for troubled banks to $100 billion, and that it additionally would offer a further $100 billion in term repos sent two important signals. First, the bank solvency crisis is intense and is deteriorating rapidly. Second, the Fed has revved up the currency printing presses (the electronic version as noted by Mr. Bernanke several years back) and will continue to create whatever money it has to create in order to prevent a systemic implosion.

Assuming the good news is that the Fed indeed has the wherewithal to prevent a systemic collapse, which it technically does, the bad news is that the price paid for same eventually will be uncontainable inflation. The current estimate for annual growth in February’s SGS-Ongoing M3 is at an historic high rate of 16.8%. The recent spike in broad money growth not so coincidentally began with the introduction of the TAF facility.

The news here literally is abysmal for the U.S. dollar and promises much higher gold prices. With a long-term outlook, gold is a buy at $1,000 per troy ounce. It also will be a buy when it hits $10,000 per troy ounce. The outlook for equities and bonds under these circumstances is not good.

The February employment survey included the usual reporting shenanigans, but it seems to be locking in consensus forecasts of a recession. The reported seasonally-adjusted 63,000 jobs loss for February was a decline of 109,000 net of revisions. Net of the monthly seasonal factor adjustment games, jobs dropped by 146,000, and those numbers were before any consideration of the 135,000 positive bias-factor (birth/death model adjustment) added into the change.

Again, more complete analysis follows in the newsletter.