Nuff Said: I WANTS ONE

The Chart to Watch

As we're all aware of by now, the Fed's propping up the commercial banking sector by monetizing debt, which my brother assures me is how all great powers eventually wane -- I suspect that's true, too. It's why my normally uber-conservative bond-laden 401(k) has a little over a pound of proxy gold in it (StreetTracks Gold Trust, GLD) as an inflation hedge.

I don't know how often it's updated, but the wickedly friendly FRED charting facility that the St. Louis Fed puts out has the following chart available:


The Fed was already allowing the commercial banking sector to debase the currency by explosive creation of monetary equivalents (esp. via the USDJPY carry trade), but this chart shows the amount to which credit is being extended using essentially worthless collateral. Or maybe not worthless; who knows how many of the subprime mortgages will really blow up in the long run, but certainly not the AAA-rated cash-reserve-equivalent collateral that should be used. Right now the Fed has no choice if it's going to fulfill its second mandate of protecting employment. Right now we're so close to Scylla that aiming the prow at Charibdis (sp?) doesn't seem like that bad of an option, but once we're in the jaws of the latter foe, this chart'll help show just how much white-phosphorus we've added down in the boilder room.