Pedro's Podium: Thoughts for Thursday 12-9-10

We're Not Printing Money: I have accused the Treasury of printing money. Well I stand corrected. Last Sunday the chair of the Federal Reserve stated quite correctly that they were not “printing” money. Technically he is correct. The mint didn’t fire up the presses and start spiting out $700 billions in cold hard cash. But metaphorically I was correct. With a wave of his hand he created money. There are a lot of people that don’t understand the difference. The truth of the whole thing centers around the different money supplies. From About.com

Definition: "Roughly defined, economists consider money to be anything that is commonly accepted by creditors as repayment of debt or by sellers in exchange of goods and services. Economists have several definitions for what is considered money in a specific situation. The definitions of money differ by their liquidity or specifically how different they are from currency. Some common definitions of money are M0 money (hard currency), M1 money (M0 plus deposits in chequing accounts and traveler's checks), M2 money (M1 plus deposits in savings accounts and deposits in money market accounts). A further definition, M3 was discontinued in 2006 by the Federal Reserve.”

M3 was defined as MO, M1, M2, and money created by debt and credit. Speculation of why the Federal Reserve discontinued reporting M3 as due to the explosion in credit card debt. To help you understand how credit creates money I always think of an old Three Stooges skit. In it Larry asks Moe if he can borrow $5. Moe says sure and hands him it to him. Curly looks at Larry and says; give me the 5 you owe me. So Larry hands it to him. Then Moe says hey give me the 5 you owe me. So Moe gets his $5 back. So from this you see that from these transactions a debt of $5 was created while $10 of debt was satisfied with only $5 in currency. One way of looking at it is that from $5, $15 in transactions occurred.

That was a simplistic example but consider the billions of dollars in out standing debt that is created by credit cards. That is in effect creating money from nothing at all. The Fed has no direct control and I’m sure that they did like reporting a number that was growing out of control and far beyond the amount of money in circulation, the M0 money supply.

So when the Feds created $800 billion dollars by transferring electronic funds to buy Treasury Bonds, they didn’t have to print any money. But they still created money. It is just a manner of how you define it. But since they say they don’t track M3, I guess they think is doesn’t exist or is important. “Hey Moe, can I borrow 5 bucks?”

Plausible Deny-ability: There was a "dumb crook" story from a few years back. It went like this: A DA was cross examining a crime victim on the stand when he asked: "Are the two men who attacked and robbed you in the court right now?" At that the two defendants raised their hands and stood up. I’m seeing something very similar in the Wikileaks scandal. I’ve been watching as officials at many levels are interviewed on the networks. Each has in some way or the other acknowledged the content of the leaked documents. Now I know a little about evidence and how it is handled. The documents that are being posted are considered by the government as stolen property. The issue that I see is with something called the “chain of evidence.” I’ve seen no one deny or question anything that has been released. Considering that we don’t know exactly who has seen these files or if they have tampered with them, I have to wonder if there is more going on here. It just seems that the idea of plausible deny ability is lost upon the government or they have chosen to allow anything to be presented as fact. But as I say it is just a feeling.

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Stopping the Obama tax increases: Did President Obama throw the Democrat party under the bus? His deal with the Republicans seemed to catch the majority of his party by total surprise. He seems very happy to put his party in a position that they thought they could play in their favor. It is possible that they will block the extension of the tax rates. They may have overplayed their hand. They seemed to be happy to allow the rates to increase at the end of the year, but November caused them to rethink this plan. I really believe that they expected to control Congress after the election. There seemed to be the idea that the American people would fall in love with ObamaCare and all things Obama. But now they find that their focus on things that the majority of the American people did not want any idea of fulfilling the Progressive agenda doesn’t seem to be possible.

It may be that President has come to realize that he really likes being in the White House. He may be thinking that if he starts to play ball with the Republicans he can pull a Clinton and win reelection in 2012. This is possible. If he stops the out of control spending and turns the economy around the American people could give him another term. I doubt his sincerity and from what I’ve seen I don’t really buy that he has become a supply sider.

I've been wondering why the Progressive media was not calling Sanders, Weiner and the other Democrats in Congress a racist. For the last two years anyone who opposed Obama and his agenda were called a racist. But now it seems that that is no longer the case. I guess I wasn’t a racist for disagreeing with him on policy issues after all. But I will not hold my breath waiting for an apology. Besides I guess that a weenie like Weiner wouldn’t know the difference.

Leadership: One last thing on the President. I’m still wondering where the silver tongued orator that campaigned in 2008 went. He has not been able to portray his policies or his ideas in a positive manner. No matter what it is, he never seems to show the ability to motivate. This week’s speeches were not what I would call his best effort. He seems to do more to turn people against his plan. He didn’t come on and talk up the tax rate extensions. He said how much he was against it. This is no way to build confidence and inspire people to not only support the policy, but to believe that they can once again feel a little more secure in a dangerous world of uncertainty.

He did the same thing when he announced that he was committing additional troops to Afghanistan. Since he won office he constantly shows doubt and uncertainty in every move he makes. It would be cynical to say that as he obtained the highest office in the land, he began to ignore his handlers. There were a lot of powerful people who helped him get to where he is. He is beginning to like the power, but he lacks the experience to do the job.