Like Manna From Heaven

Manna is an illusion, and like all illusions it passes with time.

Manna, depending on one’s beliefs was either a biblical event, or a metaphor about God providing sustenance for the Israelites in their time of need. Today we’ve all heard the term helicopter money, a metaphor about money seemingly dropped from above, falling as if it’s Manna from Heaven.

The reality is a bit more sobering. The most useful tool for the Feds and the UST was actually invented about 570 years ago; it’s called the printing press.  It was not thought of as a magical tool to create money, but one to better disseminate knowledge, which shows you how dishonest governments can be, like drug addicts pretending they don’t have an addiction.

There are many measures and definitions of the “money supply”, and they differ in some respects among economists and from country to country, but we will use the following for simplicity and clarity in what we are measuring and comparing.

MB, the monetary base, is equivalent to the actual sum of currency held by the US Treasury and the Federal Reserve as defined by all banks and other depository institutions in their accounts at the Federal Reserve.

M0 is equivalent to the coins and paper currency held by the public, i.e. outside of the US Treasury, the Federal Reserve banks and the vaults of depository institutions, in circulation plus any deposits which can be converted into cash.

M1 is equivalent to M0 plus checkable or demand and other deposits of the public held at commercial banks, savings and loans associations, savings banks, credit unions and similar items like traveler’s checks.

M2 is equivalent to M1 plus money market funds and deposits, certificates of deposit and other time deposits, but excludes long-term deposits like retirement accounts.

M3 is equivalent to M2 plus long-term deposits like retirement accounts.

As you may imagine, much of this money in the broader supply categories is not actually physical, but virtual as in digital form.  Given that all currencies in the world are now “fiat”, i.e. money by decree, you get one layer of imaginary money on top of another; that’s another topic to be addressed separately. For now let’s just keep it simple and compare the MB and the M1 over the short period of December 2019 to July 2020.

In December 2019, the MB was $3.40T, where as in July 2020 it’s $4.70T, a 38% increase. In December 2019, the M1 was $3.98T, where as in July 2020 it’s $5.33T, a 34% increase. Please note that these amounts are staggeringly higher than just a decade before, so those printing presses were really working hard!

Are we fooled into thinking that the “public” as noted in the M1 definition was suddenly blessed with a magical 34% increase in wealth? Nice try, but we can’t be that dumb….can we?

While manna maybe a literary anachronism, there are people that sincerely believe this bloated monetary policy is something necessary to provide the American people sustenance in a time of need. After all, isn’t that what we hear from our politicians, corporate leaders, financial gurus, so called economic experts and the bobble head media? Yes, for the most part sadly it is, but therein is the problem because while it may be a quick fix for debt addiction, it’s a sure way to impoverish a nation in the long run, only now the long run is getting closer by the millions. As of this month, the debt of the US exceeds its GDP, and will likely grow ever more beyond that; obviously that can’t be sustainable.

Critics have rightfully expressed concern that this policy of monetizing debt is a fool’s game, one that has never worked as empirically evident historically and in current times; it only perpetuates but does not solve the problem anymore than a drug addict ignoring the fact that the end game will be far worse than the pain of kicking the habit.

Don’t expect the critics to have any impression on either major political party; they are both intent on buying votes with more printing press stupidity, intoxicated with the cheap liquor of fake money; apparently the only thing they learn from history is how to avoid learning anything from history.

So then what is the solution? There’s no denying that it would be painful, froth with severe withdrawal symptoms.  Shrinking the money supply will tighten credit, raising interest rates, as it did under Volker a few decades ago.  There will be bankruptcies as the zombie companies and over indebted individuals face insolvency. Governments will need to become fiscally responsible, balancing budgets as their source of funds is reduced to taxation, a politically toxic alternative, not to mention economically counterproductive to recovery.

Which brings us to the ultimate natural control mechanism for preventing the Fed and the UST doing the same thing all over again assuming the above solution is engaged, i.e. a monetary standard, whether gold or some equivalent.  Along with that, we need to shut down the Fed; it has been nothing more than a tool for the cronyism of government and business, particularly Wall Street, creating ever more inequality economically, the enemy of a true free market.

I can hear the snickers of the elitist power brokers in our moribund institutions dismissing such radical ideas as impractical or outdated; what they may or may not realize is that if it doesn’t happen the old fashion way, there is an alternative that will happen anyway as the world has come to accept cryptocurrencies. It’s just a matter of time before this technological revolution of digital gold, which like its physical twin can’t be manipulated, will dump fiat currencies on the trash heap of counterfeit money.

Manna is an illusion, and like all illusions it passes with time.

# LikeMannaFromHeaven

Author: jvi7350

Politically I am an independent. While I tend to avoid labels, I consider myself a Libertarian. I find our politics to have deteriorated to a current state of ranting tribialism, and a growing disregard for individual rights; based on the axiom that silence is consent, I choose instead to speak out and therefore launched this blog.

4 thoughts on “Like Manna From Heaven”

  1. You write “we will use the following for simplicity and clarity in what we are measuring and comparing.”

    Who is the we? I thought this was just your thoughts,

    You write “In December 2019, the MB was $3.40T, where as in July 2020 it’s $4.70T, a 33% (actually 38%) increase. In December 2019, the M1 was $3.98T, where as in July 2020 it’s $5.33T, a 34% increase.”

    You write “Are we fooled into thinking that the “public” as noted in the M1 definition was suddenly blessed with a magical 34% increase in wealth? Nice try, but we can’t be that dumb….can we?”

    What then do you attribute the increase or are you suggesting the numbers are incorrect?

    > >  >

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    1. Really, you take the time to comment about “we”; really, that does warrant an answer? I clearly stated that I attribute the increase in the money supply to the printing press and debt addiction policy.

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      1. No comment on your math? Since I saw that error, why not throw in the “we.” Was it an imperial we? Also found out you could reply by email rather than go to the web page. Cool.

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      2. I didn’t have a chance to go back to Excel until now and yes there’s an error, 38% is correct. Makes things even worse than I thought. I have no idea what an “imperial” we is but the use of the we in articles is a means of engagement. In the context of this post it is meant to advise the readers that in reading the article they are to understand the terms used since, as the article points out, they are subject to some variance in definitions. That you did not understand that means you missed the context. I already responded to what the increase was attributed to. All that said, other than finding a math error (which is appreciated and will be corrected in the post), you have not really provided a comment with any insights in to the subject matter of the article. Yes, the email regarding the posting of the article and the comments to it are linked to WP, but the prior emails you sent came directly to my email and never made it to the blog.

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