Richard Daughty

The Gold Report interviewed John Williams of ShadowStats.com, who said, “I continue to track M3, the Fed’s broadest measure of the money supply until it ceased publication in March of 2006. Generally, the broader the measure of systemic liquidity, the better it serves as a predictor. In terms of giving a signal for the economy, you have to adjust the growth for inflation.”

I admit I was kind of dozing off by this time, daydreaming of the bacchanalian excesses made possible by gold and silver shooting up in price as a result of the insane increases in new money being created by the foul Federal Reserve. My reverie seemed so much more interesting than what I thought would be one of those academic exercises where smart people talk about things I don’t understand because I am stupid, and probably wouldn’t care about even if I wasn’t so stupid.

With a sudden start, I realized I was wrong! There is quite a lot of useful information in, “What’s happened historically is that every time the year-to-year change in the inflation-adjusted M3 has turned negative, the economy has followed in a recession, or if already in a recession, the downturn has intensified.”

Now, there is nobody more attuned than I to the potential catastrophe inherent in something that has happened “every time,” mostly about how I can tell you sad, sickening, sorrowful stories about money lost by betting on “what’s happened historically,” stories that will make you cry if you have any compassion or empathy, which I suspect you don’t, and neither does anybody else, and you are all secretly happy that I lost money and suffered a loss, which is what I always suspected about all of you deceitful bastards.

However, this is not about my raging paranoia or that I am a cynical old man who sees treachery everywhere, but that the M3 money supply has turned negative, inflation-adjusted, which is, as in “every time,” significant!

I was planning on calling Mr. Williams on the phone to ask him, “Did you mean ‘every time’ literally, as in ‘can’t-miss guaranteed?’” But perhaps Mr. Williams demonstrates real paranormal abilities by anticipating my call and replying – before I even asked! – that “Those signals don’t come very frequently; but when they do, they are extremely reliable.”

Extremely reliable! That’s the kind of market timing I am looking for, man!

And if you are looking for something else that is “extremely reliable,” I note that gold and silver have performed admirably for the last 4,500 years!

Mr. Williams’ data points to an economy going down, even though I see the foul Federal Reserve creating $100 billion of new money per month so that the government can spend it, and it is all Very, Very Frightening (VVF) to those of us (me) who are (is) frightened (scared out of my freaking mind) by the prospect of catastrophic inflation in prices and economic collapse.

This, in contrast to the seeming historical guarantee of gold and silver, makes it all so easy that you happily think to yourself, “Whee! This investing stuff is easy!”

The Mogambo Guru
for The Daily Reckoning

Richard Daughty

Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning , and other fine publications. For podcasts featuring the Mogambo, click here.

  • http://internet Jon Malikowski

    God, but I love the Mogambo.

Recent Articles

Bill Bonner
Confessions of a Newsletter Man

Bill Bonner

Being a financial newsletter writer certainly has a few advantages. Namely, it affords one the opportunity to comment on the financial markets without having to take them seriously. Today, Bill Bonner looks back on what drew him to this business, and the unique and entertaining cast of characters he's met along the way. Read on...


In the Year 2024

James Rickards

Panopticon goggles? Severe market panic in 2018? Gold confiscation by 2020? Jim Rickards' shocking thought-piece in the spirit of A Brave New World or 1984. Click to see how markets, economics, your money, gold, privacy, wealth building and more look a decade from now in the year 2024...


Buy Solar Before 2015

Stephen Petranek

This is the time of year when investors are easily distracted. Oil is down, and it’s creating a drastic mispricing in the solar markets. Science expert Stephen Petranek says one solar company is mispriced by as much as 40%... but it might not last until January.


We May Have Reached “Peak Shale” – Here’s Why That’s Good News!

Jody Chudley

I don't know how low the price of oil will ultimately go in the near future, but I do know that the seeds for an oil price recovery are already being planted by North American shale producers. These companies are dramatically slashing their capital spending plans for 2015, and I believe that the impact on production will surprise the markets…


“Can We Talk?”

Dave Gonigam

Our discussions in these pages tend to freak new readers out. Dave Gonigam and Addison spent a fair amount of time last week discussing the implications of a deflationary environment and Fed policies on your existing portfolio. Dave sums up their conclusion in a neat gift box with a tight bow on it in today's essay.