Nothing Original Today...Urban Survival...

A Word To Ben: Velocity

One of the simplest concepts in economics is the velocity of money. It's sort of like inventory turns ratio, to my way of thinking. You know: If you have 10 widgets in inventory and over the course of the year, you sell 10, and replace those 10, you have a turnover of 1. One in, one out, kinda thing. The formal answer to inventory turns is

:

So, if you want to have a little more money fall to the bottom line, you do what? Increase the number of times your inventory turns over during the year, or run with leaner inventory to reduce inventory associated costs (like warehousing, and such). Simple so far, right?

In the study of how money sloshes about and makes the world go round, round, round, the Velocity of Money is stated in the similar form:

That big V thingy on the left means 'velocity of money' while the big T on top there is your aggregate value of all transactions, and the big M on the bottom means the amount of money in circulation in a particular period.

I mention these two formulas today because they are at the very heart of what America is presently facing and why there continues to be a chance of the US slipping deeper into a recession and dragging the rest of the world along with us into a full-blown Depression.

Not that I'm alone in this assessment, since legendary commodities trader Jim Rogers is saying much the same thing - as you can see in this video if you've got the bandwidth...

Rogers says the US bailout approach mimics the lost decade experienced by Japan after their market peaked in 1989 - says we're trying the same thing. Worse, he says "They may turn it into that (the 1930's)..." which would put us in a Depression again.

This morning, let's consider the two formulas above from the perspective of a formerly robust business segment: Auto and truck manufacturing.

Starting first with inventory, we see the pictures floating around the net how there are scads of new cars sitting unsold, even tons of product made for the 2008 model year. What had been a turns level somewhere around 1, meaning 2008 cars were almost all sold off in that model year, has now turned into something less than 1, meaning there's leftover, unsold 2008 inventory.

This then ripples into the nation's velocity of money since fewer cars are being sold, so in our Velocity of Money figuring, the big T on top has gotten smaller, while the Big M on the bottom has remained essentially unchanged.

I say essentially unchanged because of two very items:

• Bailouts for banks does not increase velocity, since much of it's going into what amounts to a stagnant money pool. If the improperly represented "bailout" was really planned to be effective, it would have at least been augmented by a program that would either reduce inventory (meaning increase business sales in general) or it would have somehow reduced the average cost of inventory. Putting money into an account doesn't help anyone but counterparties, and then only to stabilize their credit ratings. No unwinding of excessive leverage necessary, although some of that goes on, sure. But since the money went to stagnant pools, or to pay bonus, so sorry, you been lied to and the stimulus ain't gonna work for at least 12-month and maybe as long as 24-months since it takes forever for spending wends its way through traditional spending channels and get doled out as paychecks to us working stiffs.

• There's nothing evident yet that (in my judgment as an observer) has any discernable impact on loosening the consumer's death-grip on their wallets and purses.

Now let's ask, why might that be? Employment is going down, but prices keep going up. Evidence needed?

We turn to this morning's Consumer Price Index report, realizing that hedonics (the substitution of Salisbury steaks for Porterhouse, and that kind of thing) allows these numbers to be pushed hither and yon, although since the Bushco days, it's mostly hither:

"The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in February, before seasonal adjustment, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The February level of 212.193 (1982-84=100) was 0.2 percent higher than in February 2008.

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 0.5 percent in February, prior to seasonal adjustment. The February level of 206.708 (1982-84=100) was 0.3 percent lower than in February 2008.

The Chained Consumer Price Index for All Urban Consumers (C-CPI-U) increased 0.6 percent in February on a not seasonally adjusted basis. The February level of 121.901 (December 1999=100) was 0.3 percent lower than in February 2008. Please note that the indexes for the post-2007 period are subject to revision.

CPI for All Urban Consumers (CPI-U)

On a seasonally adjusted basis, the CPI-U increased 0.4 percent in February after rising 0.3 percent in January. The energy index rose 3.3 percent in February following a 1.7 percent increase in January as the gasoline index rose 8.3 percent in February after a 6.0 percent increase in January. In contrast, the indexes for fuel oil and natural gas both declined in February. About two-thirds of the all items increase was due to the rise in the gasoline index. Compared to the July 2008 peak, the energy index was 29.2 percent lower and the gasoline index was down 44.0 percent. The food index turned down slightly in February, falling 0.1 percent. The food at home index fell 0.4 percent with five of the six major grocery store food group indexes posting declines in February. The index for all items less food and energy rose 0.2 percent in February, the same

Current rate extrapolated? 6.17% per year. They somehow don't mention the forward implications of 0.5% compounded out 12 months and instead, continue to play into the notion of backward-looking economics, which is why we get into so much trouble. No one bothers to see that cow in the road in front of the car, since we're all looking back at Abilene, wondering what we went there fore....

Unadjusted, the food (ex beverages) index was up 4.8% over the past year. What keeps things from looking worse? Energy prices were going down at an annual rate of 18.5% compared with unadjusted year-ago numbers.

But wait! Again, that's backward-looking. In the most recent month, energy prices were up a whopping 3.3%, which if you pencil it forward means a 47.7% increase in energy costs a year out, which means what? That if this kind of increase continues, we will be at $3.12 gas in a year if you're paying $2.11 a gallon now.

As the numbers came out, the folks down on Wall Street are looking to give back some of yesterday's trade which moved toward Robin Landry's 7,404 level...

I'd remind you that every close under Dow 7,404 in Landry's work, just let's longer term indicators on the 90-minute chart catch up to the already bearish count which is suggesting at a minimum a retest of the 6626 lows, or a mid-range expectation of 5,800, and a worst-case 4,400 before we get the meaningful rally.

Also seems to me that it increases the odds of jailed economics whiz Martin Armstrong's turn date (which I pencil for about April 21, since the date 2009.3 would be Jan 1 + [0.3*365 = 109.5] that gets us to a week after Tax Day, or so), to be a low, but that's not investment advice...just a dart over coffee and I tend to hit the water cooler more than the dartboard in my guesses.

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Role of Gold: While the Fed and CONgress seem only to be pushing velocity of money in the direction of bankers, while the rest of us wait around for trickle-through to show up, I have to wonder if maybe this isn't part of a globalist plan to install the New World Order, which as we all know is the Western Capitalist/ USA-British Banking Cabal's idea of how to run the [global] railroad.

I trust you've seen the headline that at the upcoming G20, the Kremlin is about to pitch a new global reserve currency. Since Russia is now the top oil producer in the world, if I read figures right, then it would make sense that they would look at the Chinese experience of buck-holding and want to avoid that. You'd probably make the same call.

But the other day, as I was reading through the government's statistics on money and such, I noticed that the US has 250+ million ounces of gold and that in whatever report I was reading, that gold was valued at $42.222 an ounce.

*Devil's in the details correction: from Wikipedia:

Gold reserves (or gold holdings) are held by central banks as a store of value. In 2001, it was estimated that all the gold ever mined totaled 145,000 tonnes.[1] One tonne of gold equated to a value of US$30.27 million as of February 14, 2009 ($941.35/troy ounces)[2]. The total value of all gold ever mined would be US$4.39 trillion at that price.[note 1]

Well, my, my, wouldn't it be a simple matter to reduce out debt and improve our nation's balance sheet (all in one fell swoop) to just let gold float up to the price which it's going for on eBay - nearly $1,000 an ounce? Suddenly, the whole US economic picture gets a lot healthier and we could get back to the real problems we have, namely, how do we put more cash into the hands of consumers?

Don't want to be the one to break this to you, but that's not the plan. You see the NWO, or at least the US-British Banker cabal has other designs, it seems, so we'll just keep perpetrating the myth that the US and world are in terrible financial times, all the while not mentioning that some of our key numbers are based on valuing gold at 1/20th of it's market value. Especially when the national debt is $11-trillion dollars. I'd sure think about putting $250 billion more value on books, but no lobbyist dough to be had on that, or what?

All this leaves me speculating endlessly that whatever the hidden agenda is behind all this, and while it's not yet clearly visible, I get all twitchery when I think about it too much.

Implausible Deniability Department

:Obama Administration: We didn't find out about AIG bonuses until this month..." Since we taxpayers now own 79% of AIG, I'd be asking WTF?

The real deal hints a Buffalo News article is that this is starting to shed light "on AIG political cash cow." You getting this yet? Money in, favors out. Yessir,

Here's a novel thought: How's about someone with a little balls/cajones in Washington (if there is such a person) puts in an amendment to any tax AIG execs that would require all members of CONgress to refund any and all that campaign money some of the Hill's worst no doubt received from outfits that later took public TARP or TALF money...and let's throw in payback of those MADOFF contributions, too, just for good measure.

It'll NEVER happen, of course, but OMG we are such sheep...