Printing Money

Via Tim Iacono, we have this chart on money supply.

A little background. Back in 2006, the Federal Reserve decided that they no longer needed to keep track of the amount of growth in money supply. Why? I have no idea as everyone else in the world of any significance still does. Anyway, the chart above is made up of official government numbers and a continuing measure done by private parties. The black line is the inferred measures.

A growing economy needs an growing money supply to some degree. Thus, the fact that the green/black line is going up is not necessarily a bad thing. What's interesting in this chart is the rate of growth (blue line). Beginning in 2005, that rate began to climb and has been climbing ever since. Money growth now hovers around 10-12%.

So what happens when you make more of something? It gets cheaper. If you make more dollars, each one is worth-less. We call this inflation. This growth in money supply is the consequence of crappy administration policies (i.e. fighting a war without tax increases, huge budget deficits) supported by a complicit Federal Reserve (Greenspan -> Bernanke pumping money into the economy). It's also why (along with the Chinese purchasing America) in the midst of all these economic pressures, interest rates have stayed relatively low when they should be rising.

History tells us this cannont end well. The only real question is will it end with a "bang" of a "slow bleed". Inflation is inevitable and ultimately interest rates will have to rise, government spending contract, or taxes increase. If taxes don't go up, inflation will be the defacto tax.

Europe and the rest of the developed world are getting it. Wonder how long until the U.S. gets it?

Added: More evidence. I remember stuff like this from the 70's and 80's before the severe recession that finally got inflation "under control".

As Jeff Cooper pointed out recently, the rich are feeling richer, and falling all over each other to get rid of paper and buy tangibles.

He mentioned Mark Rothko’s “White Center,” which became the most expensive piece of postwar art sold at auction after selling for $72.8 million, crushing a presale estimate of $40 million.

“Money has no meaning,” Angela Westwater of New York gallery Sperone Westwater told a Bloomberg reporter after the Rothko sold. “It’s a good work, but the whole marketplace is crazy.”

The painting had previously been owned by David Rockefeller.

“While it’s a spectacular painting, it’s clear the allure of having David Rockefeller’s painting in your house is going way beyond what you might otherwise consider reasonable,” said New York dealer Marc Glimcher of PaceWildenstein gallery. “That kind of thing is becoming irresistible to people.”

I've seen a number of such stories on various type of items lately.