The Gates Foundation sold off all their health care related stocks.

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.

January 8, 1835 was the only day in US History our debt was at $0.

Cool.

Looks like the bailout bill wasn’t such a good idea.

Investors make mistakes, but the global community doesn’t.

Congress has chosen the wrong path and they did it knowing that the people weren’t real keen on the whole idea.

Everybody and their brother has an opinion on this one, so I figured I’d weigh in.

It’s probably needed, but I have no idea if the current approach is the proper way to handle it.

Basically the major lending institutions are in a pickle right now. They’re holding a lot of mortgages of questionable value, and because nobody’s really sure what they’re worth nobody wants to buy them up.

So, in comes the Federal government. I’m still not sure what the plan is there. I hear a lot of “our tax dollars shouldn’t pay for this” from people but it’s my understanding that they’re simply authorizing the Federal Reserve to inject money into M3 and then dolling it out to the institutions that need liquid assets. I could be wrong on this one, but I doubt it. There’s no way the Federal government can come up with $700 billion out of thin air. The Federal Reserve has to increase the money supply. The Federal Reserve is a private corporation, so they wouldn’t be hip to the plan if there weren’t a possibility of profit in there for them.

Yes, we’re going to get hit with an “inflation tax” when the Federal Reserve increases the money supply, but the beauty of that [sarcasm alert] is that they’re no longer publishing exactly how much money is in circulation so nobody knows the full impact of a $700 billion injection! See this link for a graph showing the growth of the money supply in terms of US currency. The reporting of M3 stopped back in 2005 and given the trend in that chart we’re probably at around $13 trillion right now.

So, doing some rough math in my head, we’re looking at about a 5.5% increase in the money supply if we do this $700 billion bailout deal. Not exactly cool, but that’s not horrible in terms of inflation compared to some of the disasters we’ve seen in the last century. It’s manageable.

Now, why would I support bailing out the idiots that pretty much created this mess?

Simple: The US economy can’t function if we don’t have easily available credit for business owners. Period. End of story.

You’ve probably been paid by your employer at some point via credit. Heck, in some situations every single paycheck you get might be on credit. If you’re working for a company that can get a 10% profit margin on every dollar spent while sucking off a 6% operating line your employer is going to eat the credit line up to grow the business.

And they’re going to fall back on that credit if they have a tight month, quarter, or even a whole year.

If the credit line dries up my employer, and every previous employer of mine, is probably screwed. That means no paycheck for Mr. Justin Buist which means a mortgage that currently has a 0.5% chance of going into default just jumped to a 50% chance. That’s bad any way you slice it for the economy. There will be a cascading effect there that we just don’t want to deal with.

So, we have to do something to make sure that credit is still available in this country. I don’t think that is up for debate. The question is only a matter of what we should do.

Now, this problem has been apparent for years. Anybody that should have seen this coming did, but nobody did anything to stave it off. Because of that I’m not real keen on enacting an immediate fix-all plan of majestic proportions. I’m also not going to point any fingers based on party lines because the problem has been brewing long enough for both the share the blame. Democrats might have started the party, but Republicans have been controlling the government long enough to fix the problem, when the warning signs were right freaking there, but failed to do so.

All I know is that something might need to be done, and anybody entering the discussion with “my tax dollars” should probably be punched in the throat to shut them up. Unfortunately that’s about 80% of the population which makes discourse on the matter rather difficult.

I started driving in 1996 back when you could get gasoline for around $1 a gallon. Back then there was a 10¢ surcharge for mid-grade gas and another 10¢ increase above that for premium grade gas.

Now that we’re paying $3.70ish a gallon that’s still the same.

How does that work? Regular goes up 375%, mid-grade goes up 350% and premium goes up 330%.

I don’t get it.

Interesting post up over at The Liberty Papers: The Mortgage Bailout – Isn’t

In short no tax dollars are going anywhere so “bailout” is the wrong term.

Seems the lenders weren’t sure if they could modify the terms and still be kosher with the investors. However, now that the Federal government has said that they can modify the terms they’re going to do that.

The mortgage companies don’t want folks going into foreclosure right now because there’s no way they’ll recoup their costs trying to sell the homes on the current market. The buyers don’t want foreclosure either for obvious reasons. It looks like everybody is hoping that if they just keep playing along for 5 years with the interest rates pinned back to where they are now the market will catch up, buyers that can’t refinance will be able to sell without going upside down, the lenders are fine, and the investors will be a bit pissed that they didn’t make a great return, but they won’t have lost their shirts either.

Provided that this is actually a desired path by the lenders themselves I don’t see it as a disaster. If the lender wants to change the terms of the loan to be more acceptable for the buyer that seems like a perfectly acceptable “Free Market” solution. Whether or not the investors have a legal right to bitch about this is another matter, and that’s about the only thing the Feds are really meddling with it seems.

Johnson Controls cuts 250 jobs

I don’t work for Johnson Controls and I don’t talk to anybody that works at Johnson Controls, but I knew this was going to happen about 3 weeks ago.

West Michigan is a pretty small community.

About 9 months ago I started looking into buying a house and some land. The Metallic Surfer (former guest blogger here) told me via email, and through Abject Disappointment, that it was a really bad time to do that He said to wait it out for a while, like maybe 6 months and see how things were then.

Thankfully I’ve procrastinated on following through with my initial plan. The housing prices are coming down, sellers are having a hard time getting rid of their houses, and prices are constantly dropping

I wish I could say that I was smart enough to listen to him, but I wasn’t. I just got lucky.

But, boy, damned if he wasn’t right.

Spot on about ammo prices going up too!