The Adjusted Monetary Base Goes Ballistic.

Gary North

October 10, 2008

By now you know: I take seriously the adjusted monetary base. I have hung my hat on it. Look at this chart. Then look at the actual growth figures.

This is unprecedented. The experts at the FED are making it clear: they have only one policy remaining: inflation. This is hyper-inflation.

I don't think it will last. It would destroy the economy. But if they think short-term injections of fiat money of this magnitude are required to keep the system from imploding, they are sending a message.

No matter what George W. Bush says today to calm the markets, compare what he says with this chart. Ask yourself this: "If things are under control, why has the FED resorted to this level of inflation?"

Things are not under control.

I am not convinced that the financial system is about to collapse. Interest rates would have skyrocketed. But the FED has limited policy options. The planners have had to do this to the money supply in a time of relative calm. What happens if it really does start to implode?

I don't think deflation is a threat.

Now read this:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aKcOVxWmw7cY&refer=home