Gold Trading Boot Camp: How to Master the Basics and Become a Successful Commodities Investor

CHAPTER 25

U.S. Monetary Fundamentals and the Federal Reserve System

You start putting the macro-monetary puzzle pieces together with the Fed and the U.S. money, credit, debt, and banking statistics.

There are multiple overlays and interconnections between the monetary and credit statistics based on the components used to compile different money supply aggregates, or the breakdown in bank lending data, debtorwise. Some numbers might be important under one set of circumstances and not significant in another.

When I first started in the business on the floor of the Commodity Exchange (COMEX) in the silver pit, the single most important nugget of information that was released on a regular basis was the Thursday afternoon money supply data. To this day, I give great weight to these figures in defining the flow and change in the supply of money and credit.

This is first and foremost on my mind, as I try to discern the Fed’s true policy intent. I have often used the terminology in discussing global central banks that “talk the monetary talk,” but fail to “walk the monetary walk.” In other words, there is often monetary misdirection.

My, experience at Lehman Brothers in the 1980s was invaluable, with guys like Stan Jonas, Howard Levine, Frank Maganella, and Martin Lysaght coming together every morning at Fed time. They tried to discern Fed policy by dissecting micronuances related to the daily add or drain of money market liquidity.

It used to be difficult to figure out what the Fed ...