The Earth Bound Misfit has not one but two posts up linking to videos of Jon Stewart lambasting the financial news networks for not seeing this economic downslide. “Where were they?” he asks.

Jon, you were just tuned into the wrong channel. Less-than-mainstream pundits saw the writing on the wall. An old former guest blogger here, Metallic Surfer, pointed to the whacky things going on with gold back in 2005 and pointed to the Federal Reserve stopping their reporting on the M3 index back then. He wasn’t alone either. Looking back I really think the Fed’s decision to stop reporting on M3 was a really big thing.

A quick primer for those that don’t know what the heck I’m talking about:

M0: Physical money. That stuff you used to keep in your pocket.
M1: Money in checking accounts. Immediately available.
M2: Money in savings, CDs under $100k, and money market accounts.
M3: CD’s over $100k and money that the Fed. created out of thin air to sell to China or anybody else that’d buy it up.

If you’re wondering what kind of chaos would ensue after the Fed. stopped reporting on M3 and was free to make up currency, well, just turn on CNN and wait 8.5 minutes. You’ll hear about it. In fact, you probably already did.

Actually that’s not quite accurate. The inflation of the money supply that was done somewhat behind our backs (anybody with a clue knew what was happening when they decided to stop reporting M3) wasn’t the cause of this mess. It was simply an indication that something was wrong and that the Fed. was OK with prolonging the matter and let it linger until it got worst and worse. The Fed. only has one real tool when it comes to managing the economy and that is shrinking or expanding the money supply. They do that by setting interest rates and printing money out of thin air. In case you’ve been living under a rock they’ve been using both: We’ve got a shit-ton of US dollars in circulation now and interest rates are at 0.50%.

We’re going to see some serious inflation in the following years. Guys like Metallic Surfer were predicting it back in 2005 and we all sort of wrote them off. It’s going to happen, you simply cannot have inflation after the money supply has been increased like it has.

Remember: These were the same people telling us to stock up on ammo in 2005 because it would be in short supply. “You won’t be able to buy it next month!” they said. I pushed in an order for 3,000 rounds of 5.56, 7.62×39, and 7.62×54 just to prove them wrong.

Turns out they were right… they were only off by a few months. Oh, you can still buy the stuff today, but it’ll cost you. When’s the last time you found a case of Wolf 7.62×39 shipped to your door for $120? That’s about what I paid.

Jon, you were just watching the wrong channel. At least you can claim ignorance. Me? I was ignoring most of the predictions and went ahead and bought a house in the middle of the mess. I thought we’d hit bottom, but we didn’t.

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