Demons & Dialog

Exposing hidden news, history, & the new world order

Where Are U.S. Consumer Goods Prices Headed?

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Michael S. Rozeff
Thursday, Jan 29, 2009

Up a great deal. More than at any time since World War II. How much is a great deal? Probably far more than you expect. Read on.

We’d like to know what’s going to happen in the future to a host of variables, such as stock prices, commodity prices, the price of gold, short and long-term interest rates, consumer goods prices, real estate prices, gross domestic product, employment, etc. This article focuses on the prices of consumer goods.

Instead of examining theories, this article uses an FAQ format to answer the question: where are consumer goods prices headed? This provides a degree of simplicity and clarity. Calculations do not always add because of variations in dating, seasonal adjustments or not, rounding, etc. The specific references are all to U.S. data.

1. What is the monetary base?

The monetary base is the sum of notes and coins in circulation and in bank vaults and reserves held by banks on deposit with the central bank. In the U.S., the central bank is the Federal Reserve (or Fed) and the notes primarily are Federal Reserve notes.

2. What is the current size of the U.S. monetary base?

Approximately $1,774 billion, as of 1/14/09. This consisted of about $951 billion of bank reserves and $823 billion of currency in circulation.

3. What are bank reserves?

Bank reserves consist of currency banks hold (vault cash) and reserves they hold on deposit at the Fed. Their reserves at the Fed are like a checking account they hold at the Fed.

4. At what level are current bank reserves, and what is the usual level?

Bank reserves as of 12/1/08 were $821 billion. Bank reserves were $40–$44 billion from late 2005 until August of 2008.

5. What are excess reserves?

Excess reserves are bank reserves (or deposits) held at the Fed in excess of reserves required by the Fed’s regulations.

As of 12/1/08, total bank reserves were $821 billion; required reserves were $54 billion; and excess reserves were $767 billion.

6. What is the usual level of excess reserves?

Prior to September of 2008, excess bank reserves were about $2 billion.

7. What is the importance of excess bank reserves and, by extension, the monetary base?

Excess reserves and the monetary base provide banks with the capacity to make loans to customers. In the fractional-reserve banking systems that nations have today, the loans are a multiple of these reserves.

8. What is a money multiplier?

A money multiplier is a ratio with a measure of money in the numerator and the monetary base in the denominator.

The M1 money multiplier is the ratio of the M1 money measure divided by the monetary base. The M2 money multiplier is the ratio of the M2 money measure divided by the monetary base.



Gerald Celente: Global Economic Meltdown


Written by Michael Cooper

January 29, 2009 at 6:03 pm

Posted in Uncategorized

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