Death By A Thousand Cuts

Over the past several days we have been looking at potential tipping points. Tipping points are events which may not seem important when they occur, but in retrospect turn out to be the event that tips the scales.

There are manymore potential tipping points out there that could tip the scales and cause our economy to tank. Over the past couple of days, my reading has involved not only the ones mentioned, but new ones as well. It seems that things are happening, but not just one or two at a time, but events are occurring on all fronts.

It very well could be that instead of a single tipping point, our economy may die a death of a thousand cuts; a slow and agonizing one to be sure and we along with it.

M3

Where to start? First, yesterday I read that M3, the measure of total currency in circulation has exploded. Last week total money supply increased by $56.3 billion. Over the last two weeks the figure totals $92.4 billion. That is an annualized increase of 28.7 percent and 23.6 percent respectively. At the current rate we are set to increase the number of dollars floating another $1.2 trillion. Ouch!

This comes from a measure that the government is discontinuing come March for obvious reasons. They do not want you or I to know what they are doing behind the scenes to keep our economy afloat. That and some of the components that make up the measure are out of their control.

In the past, when M3 has gone up, the stock market has suffered. We saw a huge increase in M3 prior to 2000, in anticipation of problems surrounding the year 2000 bug. The bug never occurred, but the market tanked in 2000. Then again in 2001, just prior to and immediately after September 11. Hum, prior to? Thats interesting. And now here we go again. What do they see coming that we aren't privy to? For a clue read my past articles about possible tipping points.

The Chinese Connection

As recently reported here, the Chinese are looking to diversify further from the dollar. This will put downward pressure on the dollar and I believe we will see a resumption of the downtrend in 2006.

Add to China, other countries around the world that want to move away from pricing oil in dollars and you have a real problem. Those countries include Iran, Venezuela, and again China. Let me ask you this, do you think our government is going to allow Iran to set up an alternate world oil burse priced in euros?

All of the recent news about Iran developing nuclear power and enriching uranium is just an excuse. They are a sovereign country, just like the U.S., or Great Britain. They have as much right to develop alternative sources of energy as we do. China has been entering long-term purchase agreements with Canada and Australia for uranium. Why hasn't this made the news? Because China does not have oil. As I have said previously, this is not about terror, this is about resources.

Trouble At Home

The current administration continues to struggle with allegations of wrongdoing from every corner. Corrupt lobbyists, eavesdropping on Americans, using bad intelligence to justify a war, and leaking secret identities to the press, come to mind this morning. Three of these are high crimes and punishable by impeachment. Our integrity as a country is at stake here. We no longer have any credibility in the worlds eyes. So, why trust the dollar, when you can't trust the government that stands behind it.

Yes sir, 2006 is shaping up to be one whale of a year. I wouldn't miss it for the world.