hyperinflation.jpgJust like unemployment figures misrepresenting the number of jobless people by 50%, the FED money supply figures do not reflect the actual money supply by a long shot. Are they stupid or do they do it on purpose ? Let me guess: can really hundreds of people be all stupid ? For once, I will copy/paste an article from another source (Agora Daily Reckoning) because it explains in great detail how the FED lies about pretty much everything, and especially about the true amount of money ‘out there’.

This will impact everybody, and, as always, it’s done on purpose, and it’s not for the benefits of consumers.
Remember, the FED and the US gov purposely LIE about unemployment, stock/manufacturing/sales indexes, green shoots, recovery etc

Look at the shape of the curves below and you will understand why they don’t want you to know.
If everybody understood them, it would start a revolution instantly.

So, here it is …

When Money Supplies Go Wild!
By James Turk

The US money supply is much bigger than the official numbers
indicate…$1.25 trillion bigger,
to be exact. If you care
about the value of the dollars in your pocket, this information should
matter greatly to you.

As the financial crisis has unfolded over the last two years, the
Federal Reserve has been responding in a variety of unprecedented ways.
Therefore, it is logical to assume that these never-before-used actions
have altered long-established ways of measuring the US dollar money
supply.

The quantity of dollars in circulation is being underreported
by relying upon the traditional and now outdated definitions
used to calculate M1 and M2
. These ‘Ms’ are calculated and
reported by the Federal Reserve based on the following guidelines that
identify the several different forms of dollar currency used in
commerce:

M1: The sum of currency held outside the vaults of depository
institutions, Federal Reserve Banks, and the US Treasury; travelers
checks; and demand and other checkable deposits issued by financial
institutions (except demand deposits due to the Treasury and depository
institutions), minus cash items in process of collection and Federal
Reserve float.

M2: M1 plus savings deposits (including money market deposit accounts)
and small-denomination (less than $100,000) time deposits issued by
financial institutions; and shares in retail money market mutual funds
(funds with initial investments of less than $50,000), net of
retirement accounts.
These esoteric definitions can be confusing, so let’s bring US dollar
currency back to basics as the first step to explaining why these
definitions are no longer adequate.

There are two types of dollar currency comprising the money supply –
cash currency and deposit currency. Both are used in commerce to make
payments.

1) Cash Currency

The cash currency we carry around in our pockets is issued by the
Federal Reserve. Take a look at one of those green pieces of paper, and
you will see that they are labeled as a “Federal Reserve Note”. A note
is a debt obligation, and a few decades ago one could take that note to
a Federal Reserve Bank and ask them to make good on their debt by
redeeming it for silver, or until 1933, gold.

These liabilities of the Federal Reserve are no longer redeemable into
anything, and are therefore “IOU nothing” currency, a phrase made
famous by legendary advocate of sound money, John Exter. Nevertheless,
Federal Reserve notes remain a liability of the Federal Reserve.

2) Deposit Currency

Deposit currency is comprised – as its name implies – of dollars on
deposit in the banking system. These dollars circulate as currency when
payments in commerce are made with checks, wire transfers, plastic
cards and the like. In contrast to cash currency which circulates from
hand-to-hand, deposit currency circulates from bank account to bank
account.

Bank deposits take three standard forms – checking accounts, savings
accounts and time deposits. They have different maturities, or tenor,
to use a banking term.

Dollars in checking accounts are considered to be the most liquid
because they are available on demand. Therefore, they are part of M1
because they are the most likely deposit currency to be used to make a
payment in commerce. Dollars in savings accounts are less likely to be
used to make a payment, but nonetheless are currency because they are
spendable. So they are part of M2, which comprises those dollars less
frequently used as currency.

The dollars in time deposits are used even less, but are currency and
therefore available for use in commerce when they mature, or
immediately if the tenor of the deposit is broken. They are – depending
on the size of the deposit – included in M2 or M3, which is no longer
disclosed by the Federal Reserve.

Having provided this background information, we can now get to the
heart of the matter by looking at how currency is created ‘out of thin
air’ by the Federal Reserve and banks and the impact of their actions
on the monetary balance sheet of the US dollar.

Cash currency of course is simply printed, but every note issued is
recorded on the Federal Reserve’s balance sheet. Basically, the Fed
‘monetizes’ an asset by turning it into currency.

If, for example, a bank sells a $1 million T-bill to the Fed, the Fed
‘pays’ for it with $1 million of newly printed cash currency. The Fed
records the T-bill as an asset and the cash currency it issued as its
liability. These Federal Reserve Notes are the “currency” component in
the definition of M1 above.

In the past, the Federal Reserve only created cash currency. However,
as the credit crisis erupted two years ago, the Fed began the
unprecedented process of creating vast amounts of deposit currency. So
instead of purchasing paper from the banking system solely with cash
currency, the Federal Reserve since the start of the financial crisis
has increasingly relied upon deposit currency to purchase paper.

Regardless how the Federal Reserve pays for the paper it purchases –
cash currency or deposit currency – it is creating dollar currency and
perforce expanding the money supply. But the traditional definition of
M1 does not accurately capture this process when the Fed uses deposit
currency to pay for its purchase. In fact, it is totally excluded.
Because the Federal Reserve did not create deposit currency in the
past, none of the Ms take it into account.

Consequently, the traditional definitions of the Ms are outdated
because they do not capture the total quantity of dollars in
circulation. Because M1 is underreported, so too is M2.

There has been an unprecedented amount of deposit currency created by
the Fed over the past two years. The following chart illustrates this
point. It shows the quantity of demand and checkable deposits, i.e.,
the amount of deposit currency, at the Federal Reserve since December
2002.

From December 2002 until the collapse of Lehman Brothers in September
2008, the quantity of deposit currency created by the Fed averaged
$11.8 billion, an amount that is relatively insignificant compared to
total M1. Presently, it stands at a record high of $1,246.2 billion,
which of course is highly significant.

More to the point, none of this deposit currency is captured in the
traditional definition of the Ms. The quantity of dollar currency is
therefore significantly underreported, which is illustrated by the
following chart.

The Federal Reserve reports M1 to be $1,716 billion as of February
15th. When deposit currency created by the Federal Reserve is added to
the traditional definition of M1, M1 after adjustment is actually 170%
higher at $2,918 billion. Its annual growth increases to
29.5%, nearly 3-times the rate reported by the Fed
and more
importantly, is an annual rate of growth in the quantity of dollar
currency that is approaching
hyperinflationary levels
.

The US dollar is being inflated and worryingly, the rate of
new currency creation is approaching hyperinflationary levels.
Unless
the Federal Reserve changes course, the US is headed for a deposit
currency hyperinflation like those that plagued much of Latin America
in the 1980s and 1990s.

DISCLAIMER : I am receiving no financial compensation, directly or
indirectly, from Agora. I am a regular subscriber and I just wanted to
share this with you. I asked their permission to post this message. You
decide what you do next ! But whatever you do, always do it PEACEFULLY.