That's what NDD's posts are about. April implies Deflationary Bust deepens.

This is why Bernanke turned on the printing presses to the point the bearings burnt out.

Now, with the added possibility of a credit rating downgrade and even the D word (default), things might change. and the tightening of the money supply is another major worry....i.e. it could happen more quickly than the Fed's ability to respond...not a smooth ride in other words.

If this isn't a trial balloon.

Of course inflation is coming. Geezus ... you can't have the kind of "money printing" that they are doing and not have inflation. Yes, the deflationist argument has merit and we have seen some debt destruction. But falling prices are not necessarily deflation.
Inflation, OTOH, has an entire cycle to run and we have only witnessed half of that cycle. I will let Jens O. Parsons explain.

"Everyone loves an early inflation. The effects at the beginning of inflation are all good. There is steepened money
expansion, rising government spending, increased government budget deficits, booming stock markets, and spectacular
general prosperity, all in the midst of temporarily stable prices. Everyone benefits, and no one pays. That is the early part
of the cycle. In the later inflation, on the other hand, the effects are all bad. The government may steadily increase the
money inflation in order to stave off the latter effects, but the latter effects patiently wait. In the terminal inflation, there is
faltering prosperity, tightness of money, falling stock markets, rising taxes, still larger government deficits, and still roaring
money expansion, now accompanied by soaring prices and ineffectiveness of all traditional remedies. Everyone pays
and no one benefits. That is the full cycle of every inflation."
- Jens O. Parsons

One thing that immediately pops out at me regarding Andrews' data (graphs) is that the U3 and U6 plots are identical throughout the entire time period being measured (with U6 only being an expanded version of U3, as if one merely turned up the volume of U3 on an oscilloscope). Look closely, even the smallest of details is mimicked in the U6 data. Are we to believe that the two can be tied so consistently for over so long a time, with never a hint of one lagging or leading the other? I for one would be most interested in the methodology in how these data were actually calculated and finalized, as it appears that only superficial estimates were used to expand and/or fabricate existing numbers; in other words, no new data or data assessment appears to be present.

Thank you for your response.

I have the utmost respect for all the contributors here. You have given me a crash course in macro-economics (and I love the Friday night videos!)

My background is more consumer marketing - so I'll submit to your economic expertise

Thanks for the links! 

From the Bloomberg article:

Gross said in an interview today on Bloomberg Television that while a U.S. sovereign rating cut is “certainly nothing that’s going to happen overnight,” financial markets are “beginning to anticipate the possibility.”

I'm not feeling warm and fuzzy.

I love it when lurkers pipe up. Glad to see ya.

I saw that too and something about Geithner doing "debt reduction" along with the Fed to try to stop a downgrade. But I saw Bill Gross of PIMCO (who runs the world) say a credit rating downgrade for the U.S. is inevitable.

Bloomberg sums it up.

In terms of implications all I know is it would be the same as if you had your FICO score tank. You would not be able to get more loans, or as easily, your interest rates would go up, you might need more secured collateral.

In terms of Treas. auction failure, hopefully midtowng will see your comment. I think that would either trigger selling debt at a major interest rate, possibly a default.
i.e. dollar with devalue, inflation (to hyperinflation) and the economy would grind to a halt.

but in detail what would happen, it would make a very good post.

I found a doomsday piece - with white paper on this.

The P.B.G.C.’s former director, Charles E. F. Millard, was subpoenaed to testify at the hearing Wednesday. But he cited his constitutional right to avoid self-incrimination and declined to answer any questions.

Mr. Millard, who resigned in January, has been accused by the agency’s inspector general of having inappropriate contact with companies including BlackRock, JPMorgan Chase and Goldman Sachs, all of which competed for and won contracts to help manage $2.5 billion of the agency’s funds. Those contracts will now most likely be canceled.

Which I have to ask .... What the hell just went down?

offered in February. The link is in the paragraph that begins "FYI".

in the above post.

Got an inside track on a new bill they are trying to publicize. I need to read the bill first before I think it's the cat's meow, but Public Citizen, with their legislative analysis teams is usually spot on in bill endorsements. Note, NC is endorsing (and haven't we loved their coverage on the entire financial crisis?). We'll see if Bernie Sanders introduces it in the Senate (or other workin' for the folks Senators).

Here is the raw Email, which you may want to check out the bill in thomas.gov and cover yourself in a blog post:

===========================================================

Rep. Grayson just sent out the following letter to fellow Democratic members of Congress encouraging them to co-sponsor HR 1207, the bill to audit the Federal Reserve , a bill authored by Ron Paul and cosponsored primarily by Republicans . It is co-signed by a mixture of liberal economists, public interest groups, bloggers and civil libertarians. This is the first time as far as I know that a generally liberal coal ition has encouraged Democrats to pressure the Federal Reserve.

Tyler Durden of Zero Hedge and Jane Hamsher of Firedoglake have posted on it and are collecting signatures.

Tyler Durden: http://zerohedge.blogspot.com/2009/05/time-to-make-federal-reserve.html

Jane Hamsher: http://firedoglake.com/2009/05/21/alan-grayson-says-audit-the-fed/

Petition: http://action.firedoglake.com/page/content/graysonletter/

Bring Some Accountability to the Federal Reserve

Letter endorsed by:

Dean Baker, Center for Economic Policy Research

James K. Galbraith, University of Texas and Senior Scholar of the Levy Economics Institute

Bob Borosage, co-director, Campaign for America's Future

Tyler Durden, Zero Hedge

Bill Black, Associate Professor of Economics and Law University of Missouri-Kansas City

Jane Hamsher, Firedoglake

Glenn Greenwald, Salon

US PIRG

Public Citizen

A New Way Forward

Consumer Action

Dear Colleague,

I write to ask you to co-sponsor HR 1207, the Federal Reserve Transparency Act, which would give the Government Accountability Office the authority to audit the Federal Reserve and its member components, and require a report to Congress by the end of 2010.

The Federal Reserve System operates as the central bank for the United States, managing the economy’s money supply and overseeing the banking system. Until recently, the Fed has not picked winners and losers when distributing money, nor has it brought credit risk onto its balance sheet. It has slowed or stimulated the economy by raising or lowering interest rates. Since March 2008, however, the Fed has resorted to using its emergency powers to pick winners and losers, and to take massive credit risk onto its books. Since last September, the Fed’s balance sheet has expanded from around $800 billion to over $2 trillion, not including off-balance sheet liabilities it has guaranteed for Citigroup, AIG, and Bank of America, among others. The bank is also ‘monetizing’ the debt of the United States Government by purchasing massive amounts of agency and Treasury bonds. An audit is the first step in bringing this unaccountable system under the control of the public, whose money it prints and disseminates at will.

The Federal Reserve is an odd entity, a public-private chimera that controls the US monetary system and supervises the banking system. The system is governed by a Board of Governors, with twelve regional reserve banks that serve a supporting role. While the Governors are appointed by the President with confirmation by the Senate, the regional Reserve Banks have boards of directors chosen primarily by private banking institutions. Right now, for instance, the CEO of JP Morgan, Jamie Dimon, serves on the Board of Directors of the New York Federal Reserve Bank, as did Goldman Sachs Director Stephen Friedman.

This creates striking conflicts of interest and unseemly appearances in the management of what is ultimately the public’s money. Consider:

· JP Morgan’s CEO was a board member of the New York Fed even as he negotiated on behalf of JP Morgan with the New York Fed for a $29 billion bridge loan to allow his company to take over Bear Stearns.

· New York Fed and Goldman Sachs board member Stephen Friedman purchased 37,300 shares of Goldman Sachs stock in December at the same time as Goldman received permission to convert to a bank holding company regulated by the Federal Reserve. Friedman at the time was also overseeing the selection of a New York Federal Reserve President to replace Tim Geithner, and the New York Fed ended up hiring another alumni from Goldman Sachs.

· According to the bank’s website, the two “class B” directorships of the New York Fed that are supposed to represent the public are vacant.

· Enron’s Jeff Skilling was on the board of the Dallas Federal Reserve Bank.

Criticism of banker influence and control of our monetary system is not new. However, the urgency of the financial crisis and the actions of the Fed picking investment bank winners and losers have changed the nature of the criticism. The Senate just passed a non-binding resolution requiring more transparency at the Federal Reserve in its Budget Resolution.

Still, neither the GAO nor the Federal Reserve Inspector General has audited the books of the Federal Reserve or its regional banks. The Financial Services Subcommittee on Oversight and Investigations held a recent hearing with Federal Reserve Inspector General Elizabeth Coleman. In that hearing, Coleman could not tell me who had received over a trillion dollars in Fed lending, what kind of losses the bank had suffered on its $2 trillion portfolio, appeared unaware that the Fed engages in trillions of dollars in off-balance-sheet commitments, and was not investigating the role of the Fed in allowing the collapse of Lehman Brothers. Coleman’s responses were so remarkable that when the video of this exchange was put on Youtube, it was watched more than 350,000 times.

Furthermore, the Federal Reserve has refused multiple inquiries from both the House and the Senate to disclose who is receiving trillions of dollars from the central banking system. The Federal Reserve has redacted the central terms of the no-bid contracts it has issued to Wall Street firms like Blackrock and PIMCO, without disclosure required of the Treasury, and is participating in new and exotic programs like the trillion-dollar TALF to leverage the Treasury’s balance sheet. With discussions of allocating even more power to the Federal Reserve as the ‘systemic risk regulator’ of the credit markets, more oversight over the central bank’s operations is clearly necessary.

The net effect of recent actions has been to isolate financial policy-making entirely from democratic input, and allow the Treasury Department to leverage the Federal Reserve’s balance sheet to spend money it cannot get appropriated from Congress. The public does not know where trillions of its dollars are going, and so has no meaningful control over the currency or this unappropriated “budget”. The extraordinary size of these lending facilities combined, the extreme secrecy, and the private influence is a dangerous seizure of Congress’s constitutional prerogative to appropriate public monies and control the currency.

An audit of the Federal Reserve may not be sufficient to control this sprawling system or bring it back into balance, but it is a start. The public has a right to know to whom the US government is lending trillions of dollars. Dancing around this issue with technocratic terms like ‘increasing liquidity’ is preventing a full and long overdue public debate on the role of the Federal Reserve and the influence of private banking interests in the governing of our economy.

I encourage my colleagues to support H.R. 1207, so that we can bring some transparency to our banking system and allow the public to have a real debate over the fundamental direction of our nation’s political economy.

Regards,

Alan Grayson

Member of Congress