That about sums it up. Don't think that lower interest rates will necessarily even help anymore.
Japan can't do it alone it is basically the only nation directly applying support to the dollar...and they are barely treading water...
Who else can support the dollar then? Realisticly no one...Japan and the US are the top of the ponzi scheme...when the US finally starts to crumble the whole thing will hyperdeflate...implode
Civilization as it is currently understood is totally dependant on the US ability to produce debt inflation...real estate is the number 1 debt factory...and rates can only go so low to support the volume needed...soon infinite volume will be needed and rates can not drop faster and faster infinitly...
“The M3 money supply decrease of the past 3-4 months is unprecedented in the
past 59 years, only 1943 is worse.” Short’em High
The money supply more or less leveled off this week. M-2 money supply increased by $3 billion but M-3 dropped $1. Inflation adjusted money supply is an official component of the leading indicators because of its correlation to economic activity. The heavily manipulated CPI is used to compute Inflation-adjusted money supply, along with many components of GDP. Since the last CPI came in negative, I suppose the Fed will say not to worry about the continued stagnation in the money supply.
However the dynamics of credit bubble implosion are now operative (see yobob1/HypTig/others explanation for more). The problem the Fed has is that by itself, it is no longer is able to promote credit growth along the hyperbolic curve needed to offset the mounting interest and principal repayments, plus credit losses from the debtors (i.e Scamalot and money losing companies). Authorities continue to encourage credit expansion where ever possible – mostly through new home purchases, the stock market and even newer areas of speculation like commodities.
Central bank purchases of the US dollar were up about $55.5 billion the last six weeks, or about an annualized rate near $500 billion. The massive $ purchases have not influenced the overall trade weighted value of the US$. Apparently these foreign central banks, but mostly Japan, are willing to swallow the entire US balance of payments deficit - while not worrying about the possible inflationary consequences to their economy or the world. Well actually, despite their pronouncements to buy a trillion more US$ if necessary, they are a little more worried lately because they know that they alone can not stop a major dollar crisis if one develops.
Continuous heavy intervention on behalf of the US$ (from Japan) expands the world money supply pool outside the US - and has seeped back into US markets directly (in bonds) and indirectly (stocks). This temporarily offsets the impact of the steadily falling domestic money supply. However Japan is planning to become more active in the process of sterilization, which is the process of offsetting the huge increases in the supply of yen sold by purchasing them back through – for instance – special yen bill/bond sales. When Japanese interest rates start rising, which they have not done lately, it may be a signal to look for less liquidity in financial markets.
On the bright side for gold bulls, the falling US$ and increasing supply of world money has continued to support gold – as well as other internationally traded commodities (excluding some tainted farm goods).
With credit/debt growth slowing down percentage wise (see also the MoGauge report by Doc), and as kind of a leading indicator for money supply growth, look for a continued stagnation in traditional money supply measures.
Any lurkers should get a subscription and read what Doc has to say about this subject. You can find a sample at http://www.guruboard...ult.asp?aid=116.