by Tim McMahon

I'm surprised we haven't heard much in the news about this but as of March 23rd 2006 the government will no longer be publishing the M3 money supply data. Most people probably say "Who Cares?" Right?

But you should care! And here's why:

"The Federal Reserve tracks and publishes the money supply measured three different ways-- M1, M2, and M3.

These three money supply measures track slightly different views of the money supply.

The most restrictive, M1, only measures the most liquid forms of money; it is limited to currency actually in the hands of the public. This includes travelers checks, demand deposits (checking accounts), and other deposits against which checks can be written.

M2 includes all of M1, plus savings accounts, time deposits of under $100,000, and balances in retail money market mutual funds.

But that is all small potatoes, M3 includes all of M2 (which includes M1) plus large-denomination ($100,000 or more) time deposits, balances in institutional money funds, repurchase liabilities issued by depository institutions, and Eurodollars held by U.S. residents at foreign branches of U.S. banks and at all banks in the United Kingdom and Canada."

In other words, M3 tracks what the big boys are doing with the money. This includes US dollars held in banks in Canada and the UK (called Eurodollars) not to be confused with the Euro which is the standard currency of Europe.

So the question immediately arises why would the FED stop tracking this? The reason they give is that:

1) it will save money

2) That all the money that it tracks is tracked by other indicators.

First of all, since when is the government interested in saving money? I've never heard of a government program being cut once it is on the books. There are stories of government offices being created for the purpose of WWII and continuing on for decades even though the employees had absolutely nothing to do!

If they were eliminating M1 they could say the money is included in other indicators because M1 is included in M2 and M3. If they eliminated M2 it would be included in M3 but what is M3 included in?

So, perhaps I'm just suspicious by nature but it begs the question, what are they trying to hide?

Well, if you've read any of our other articles you will know that inflation and the money supply are very tightly integrated. Increases in the money supply are the direct cause of inflation.

With all its efforts at "Tracking Inflation" most everyone agrees that the last thing the Government really wants is for the general public to know how much it is stealing out of your pockets through inflation.

Inflation has been called "the hidden tax" and that is exactly what it is. When the Government "prints" extra money what do you think it does with it? It spends it of course!

What would happen if you started writing checks (creating money) from an account that was empty? You'd end up in jail! But that is exactly what the government is doing when it creates money out of thin air.

Enron isn't the only one who knows how to cook the books!

For years now in an effort to hide the actual amount of inflation, the Bureau of Labor Statistics (who tracks the inflation rate) has been erasing inflation through a trick called "hedonics".

Basically they say since a new computer is faster than an old one you get more for your money, so they adjust the price down.

So even though a new computer might cost you $500 they say since it is twice as fast, it is really only costing you $250. But try to explain that to "Best Buy" when you want to pick one up and see how far you get.

They use the same logic for cars and other things. Everyone who studies it knows the Government is fudging the numbers, but it has gotten so bad that now they have to hide the M3 altogether.

Again I ask why? Well, I have a theory. The U.S. trade deficit is running at an annual rate of about $800 billion. That means we are spending $800 billion more than we are earning in the world markets. Basically, we are sending dollars overseas (primarily to China) and they are sending us stuff.

Well, what are the Chinese doing with all that money we are sending them? Are they buying our stuff? Nope! That would reduce our trade deficit. They are actually saving about 50% of their Gross Domestic Product (GDP). In other words, as a Nation, they save half of what they make or about 1.1 Trillion Dollars a year.

On a nationwide basis (this includes Government, Business and personal) the U.S. only saves 13% of its GDP. But on a personal level the picture is much worse. Chinese households save 30% of what they earn while U.S. households save less than Zero! On average, we actually spend .4% more than we earn every year.

It is hard to imagine but it is true. So what are the Chinese doing with all that extra money? They can't just pile it up in their garage (if they had one). So what are they doing with it? Buying back our debt. The Chinese are huge buyers of U.S. Government Treasury securities.

Someone said recently that it's hard to tell who's crazier. "One spends money it hasn't got and the other sells to people who can't pay."

Basically, the Chinese are loaning us the money to buy their stuff. And the Government is printing the money to do it. So my theory is that in order to hide all the money that is being created and sent to China the government is going to stop tracking M3.

The Smoking Gun

It is no coincidence that the M3 went up an annualized 9.4% in the last three months and an annualized 17.2% in December alone and now the FED wants to stop tracking it!

Why bother tackling a problem of this magnitude when you can just bury the evidence? Who wants to leave a "smoking gun" laying around? A 9.4% increase in money supply should translate into a 9.4% inflation rate (if GDP produces exactly enough to counteract obsolescence).

Even if there is a 1% increase in the supply of goods, that still means that we really have 8.4% inflation rather than the 3.6% the BLS is telling us.

In order for the 3.6% number to be true-- we would have to have 5.8% more stuff than last year (9.4% - 3.6% = 5.8%). Do you have 5.8% more stuff than last year? I didn't think so.

The writing is on the wall. When the Government starts hiding data the problem is big! If this trend continues, inflation is going to come roaring back big time. We will see the late 70's all over again. The war is Iraq and the Billions in Hurricane damage have to be paid for somehow and the "hidden tax" is the easy way out.

Now is the time to begin stocking up on inflation hedges.

To Your Wealth and Abundance,

Alexander The Great Alperovich

by Tim McMahon, Editor

If you have $5,000 - $10,000 in Credit card balances
You can save thousands using this simple method

Have you ever wondered how you can ever get out from under all that debt?

If so you are not alone! The average American household has over $5000 in credit card debt and many cards charge 18% - 21% per year in finances charges.

Did you know...

If you owe $5860 at 18% interest you will end up paying over $1000 in interest in just one year?

That means...

If you pay the minimum balance you are just paying the interest and you will NEVER get out from under all that debt.

Worrying about all that debt has to be stressful !

But if I could let you in on a little secret how you can sneak out from under that load of debt to a life of less worry about those bills would you be interested? Of course you would, who wouldn't?

If the first $1000 you pay just covers the interest and doesn't even make a dent in the principal, the key is to bypass the interest. At first you might be thinking, "that is impossible" the banks won't allow it. But that isn't true.

How to By-Pass the Interest

Your current bank won't let you just stop paying interest but that doesn't mean another bank won't. You see... banks are fighting with each other to see who can grab the most of those $1000/yr. income streams.

Put yourself in their place for a moment... What would you do to guarantee that someone would pay you $1000 per year for life? Would you be willing to give them the first year free?

That's exactly what banks are doing! They figure that once they have you it is a gravy train for them for years and years to come. So why not offer 0% interest for the first year?

Make the Bank's Greed Work for You instead of against You

So what we need to do is figure a way to beat them at their own game. If you pay the balance in full every month you get to use the bank's money for a month with no interest charges. Not bad free money...

However, once you rack up a huge balance it isn't possible to do that. So... that is why banks make it so easy to get the money. They want you to be in debt. So many banks offer a 0% "Introductory Rate" which usually lasts for 12 months. This is to give you time to rack up a big bill that you can't pay off.

But what if you could "turn the tables" on the banks and use that time to pay off your bills?

Use the extra $1000 to pay down the balance

The key is simply to transfer your balance from a card that is charging you 18% to a new card that is offering 0% interest and use the extra $1000 that would have gone toward interest on your old card to help pay off the balance during the 12 month introductory period. Simple right?

Be careful once the 0% period expires because rates will jump up.

You want to be sure to use the introductory period to get ahead (not further into debt).

Simply Divide your current balance by 12 depending on the card you have chosen. If you owe $5000 it would be $5000 divided by 12 which equals $416.70

Then make payments of 1/12th each month

Remember at least $67 out of that $416.70 would have gone toward interest under your previous card!

What if your balance is so large you can't make payments of 1/12th ?

Don't think you can make payments of 1/12th? Pay 1/24th and get a different zero% card 12 months from now. 1/24th of $5000 is $208.33

Remember this is only temporary! But if you can make a serious dent in your debt during the introductory period you will be way ahead.

Can you come up with $141 a month to get you out of debt?

To pay off the $208.33 you really only have to come up with an extra $141 a month ($208.33 minus the $67 you are already paying in interest). Most families initial reaction is "Oh we don't have an extra $141 per month!!!" But I am willing to bet that you do! The secret is knowing where to look!

Where to look for the Money?

How often do you eat dinner out? Fast food or Restaurants?

2-3 Times per week ?

If you eat out 10 or more times a month (2-3 times a week) An average family of 4 will spend about $30 at McDonalds for a meal... so 10 meals will be about $300 right there.

Give up one McDonalds meal a week = 4 x $30 = $120/month

Give up one Restaurant meal a week= 4 x $50 = $200/month

How much do you spend in vending machines for cokes and snacks?

Give up one candy bar or Coke from a vending machine a day = $30/ month

Do you take your lunch to work or eat out?

By bringing your lunch from home you can easily save $6/day x 5 days = $30 per week. $30 x 4 = $120/month.

What about potato chips...Soda or beer... or cigarettes? How much do you spend a month on them?

Two bags of Chips per week $3ea = $24 / month

Soda $20 - $30 / month

Beer ? $$$ / month

Cigarettes? $$$/month

Total

Here is how much one family could save:

Dinners $120+ Lunches $120 + Vending $30 + Beer $50 +Cigarettes $100=

Total savings $420/month

Of course your spending patterns will be somewhat different but...

I'm sure if you really put your mind to it you can find a way to come up with enough to pay 1/12th to 1/24th of your credit card debt off every month. Other ideas include having a yard sale and selling off things that you never use like those old golf clubs or treadmill that are just gathering dust in the garage.

(A better idea would be to give up the chips and start using the treadmill and use this as an opportunity to not only get your finances in shape but your body as well. Giving up McDonalds and potato chips might be a good start!)

Very Important!

If you can't eliminate all of your debt the next best thing is to at least take a big bite out of it. When the introductory period is about to expire find another new card with 0% and start the process all over again. Don't get caught when the card rate jumps up from Zero!

Make it a Habit

However much you decide to pay toward reducing your debt... make it a habit and pay that amount toward the debt every month.

Better yet, schedule the payment so 1/12^th or 1/24^th or whatever, is taken out of your checking account every month without your having to think about it. Make it like your house payment, it has to be done every month no matter what! You will be amazed at how little you will miss it if you schedule the payment and don't even have to thnk about it.

The key to this system

The key to this system is to not use the new card for new purchases until you have it entirely paid off (and then always pay the entire bill every month).

What About New Purchases?

So you might wonder what you are going to do about new purchases for the next year. The first rule is NEVER, NEVER, NEVER, NEVER, NEVER buy anything you can't pay off when the bill comes. (Unless it is on a zero interest card that is automatically scheduled to be paid off before the expiration of the 0% period.

Use the Two Card System

1) Use one card for new purchases and pay it off every month without fail.

If you don't think you have the will power to pay it off every month... use only a debit card attached to your checking account so you can't overspend.

2) Get a second card that offers 0% Balance transfers carry the balance on this card and pay it off before the introductory period expires!

Not all cards are created equal!

The key to this system is locating a card that will allow 0% interest on balance transfers. Some cards only offer 0% on new purchases.

Fortunately, I have been able to locate a couple of cards that fit the bill nicely. I've created links for a couple of my favorite 0% interest cards to make it easy for you.

For instance the Chase Platinum VISA® Card offers 12 months with 0% APR and may even offer a cash back bonus.

The Discover^® Platinum also offers 12 months with 0% APR with up to 5% cash back but be sure you understand the terms the key phrase is the "up to". If you are going to use the two card system you might want to use the Chase Platinum VISA® Card to transfer your balance and use the Discover^®Card for the new purchase card (that you will pay off every month).

What if You can't get a O% Balance Transfer card?

If you can't get a card with 0% interest on balance transfers there is another way but it is a bit trickier. The basics are as follows:

Step 1- Buy your new purchases on a card that offers 0% on NEW Purchases.

Step 2-Use the money you would have paid for purchases like groceries, clothing, gas etc. to pay off your high interest card. Over time your 0% card balance will increase and your high interest card will decrease.

Specifically How this works

You can use a card like the AMEX^® Blue card for all your new purchases (like food and clothing). Your rate will be 0% on the new purchases. The trick is to pay the minimum on this card and use the money you would ordinarily have spent on these items to pay down the higher rate card. So in effect you get the balance transferred to the AMEX card but it may take several months to accomplish. If you spend $1400/month on Gas, Food, Clothing etc. it will take four months to move your balance from your current card to the AMEX card.

A simpler choice (but a bit more expensive) is to transfer your balance to the AMEX^® Blue card if your current rate is higher than 3.99% transfer rate. Of course you won't save as much but some savings are better than none. Of course if you are trying to cut expenses you want a card with No Annual Fee (all the cards mentioned here have no annual fee).

I sorted through the terms on dozens of cards and have created links to some cards that look like they might be helpful. I personally use all of these cards.

Use the Banks greed against them

Just Choose the one (or two) cards that are best for you and click the card for further details (there is no obligation). Take advantage of the free money to reduce your debt by paying it off before the introductory period expires.

Best Wishes for a debt free life.