ry Data for 2011
January 9, 2012Posted by Economics9698 @ 12:24 PM
This graph of the M-2 money velocity sums up the economy since Bush II and Obama
As boring as it is for the average person it is important to understand some basics about monetary policy, or money. It is important because politicians rely on the average American citizens’ ignorance of monetary policy to steal from them. Removing this ignorance exposes common thieves in Washington D. C., Wall Street, and the Federal Reserve.
Briefly the Federal Reserve prints fresh money and distributes it to Wall Street banks through the Federal Open Market Committee (FOMC). The FOMC buys billions of financial instruments (certificates of deposit, bad mortgages, etc.) from these banks. The banks use the money to give out loans, this is justified as increasing “liquidity” in the markets.
The selected banks can do with the money whatever they want, speculate on Wall Street stocks, and put the money back into short term US Treasury Department T-Bills, even back into the Federal Reserve.
The federal government is also a beneficiary of the Federal Reserve printing money. Third party brokers buy federal government T-Bills, notes, and bonds, then sell them after a short period of time, back to the Federal Reserve. This buying of federal government notes allows politicians to finance vote buying schemes and pay off political special interest without raising taxes, the cost is paid by future taxpayers or current ones through inflation. Either way the politician get to hide the theft from the America people because of the Federal Reserve.
The Federal Reserve currently owns $1.66 trillion of the $15 trillion US Federal debt.
Good old fashion printing of cash up 18.5% in 2011
The newly created money allows Wall Street and Washington politicians to purchase assets at “old” price levels before the new money has worked its way to Main Street in the form of inflation.
Similar to a classroom full of 30 students and the teacher gives only two of her favorite students $50 each and tells the students to share the $50 with the other students. We all know what will happen; the two favored students will keep $25 for themselves and pass the remaining $25 to the next favored students, all the way down to the least favored students. This is how the Federal Reserve System works.
If you are a Wall Street banker or Washington DC politician you get special treatment not available to average Americans.
For 2011 the Federal Reserve increased the M-1 money supply 18.5% from $1.8288 trillion to $2.1678 trillion.
In 2011 the M-2 supply increased 9.8% from $8.8037 trillion to $9.6648 trillion.
The Money Zero Maturity (MZM) increased 8.9% from $9.8562 trillion to $10.7373 trillion.
The monetary base, the money the Federal Reserve prints, increased 33% from $1.987 trillion to $2.643 trillion in 2011.
Did anyone on Main Street get a 9%, 10%, or 33% raise last year?
Federal Reserve purchases of US Treasury Securities, monetizing the debt?
And what have we the people received for all this printing of cash? The money velocity for M-1 is at a 16 year low, M-2 money velocity is at a 48 year low, and MZM is at the lowest its been since records have been kept starting in 1959. Increasing “liquidity” does not seem to be stimulating the economy.
People are not spending money, wealth is being transferred into a few elite’s hands, and the economy is headed towards a monetary disaster.
Below are definitions of M-1, M-2, MZM, and MB from Investopedia.
M-1 is all physical money such as coins and currency; it also includes demand deposits, which are checking accounts, and Negotiable Order of Withdrawal (NOW) Accounts.
M2 is a broader classification of money than M1. Economists use M2 when looking to quantify the amount of money in circulation and trying to explain different economic monetary conditions.
MZM is a measure of the liquid money supply within an economy. MZM represents all money in M2 less the time deposits, plus all money market funds. MZM has become one of the preferred measures of money supply because it better represents money readily available within the economy for spending and consumption. This measurement derives its name from its mixture of all the liquid and zero maturity money found within the three “M’s.
The monetary base is the total amount of a currency that is either circulated in the hands of the public or in the commercial bank deposits held in the central bank’s reserves. This measure of the money supply typically only includes the most liquid currencies.