In an article published yesterday by the Wall Street Journal, Did the Fed Cause the Housing Bubble?, David Henderson continues the practice of pulling the wool over the eyes of the public.

He claims that M1 and M2 fell in the early part of the decade, showing (he says) that the Fed did not dump new money into the money supply.

His claim is highly deceptive, particularly since he also claims that China and other foreign investors saved dollars as further evidence for his argument. The reason this is deceptive is that M1 and M2 do not measure most foreign dollar holdings!!! M3 (discontinued by the Fed in 2006) measures the true money supply much more accurately. Only M3 includes time deposits, institutional and individual money-market funds, and short-term repurchase agreements. In other words, unless the money actually gets spent at a cash register or sits in a checking account, Henderson doesn't count it! What rubbish!

Henderson also protests, “Moreover, if the Fed was the culprit, why was the housing bubble world-wide? Do Mr. Greenspan's critics seriously contend that the Fed was responsible for high housing prices in, say, Spain?”

Yes, of course the Fed bears responsibility in Spain! The Fed controls the dollar, and the dollar serves as the official reserve currency for the entire world-wide currency supply ever since Bretton Woods. What the dollar does (and what the Fed does) directly influences what the other fiat money central banks do, including the Bank of Spain. His claim that the Fed has no influence over real estate in Spain borders on the absurd and intends to deceive the uninformed, not to enlighten them.

Bear in mind that China recently called for ending the dollar as the reserve currency in the world fiat money system during the upcoming G20 meetings, which President Obama as reported in a Wall Street Journal article strongly protested. Did China call for such a change just to be mean-spirited? No, they did it because they're terrified that the huge amount of dollar-based savings they already have will lose value dramatically as the Fed continues to expand the money supply, savings which serves as the reserve for their own currency, the yuan, savings which…wait for it!…don't get counted by the author's (and the Fed's) biased way of measuring the money supply!!!

Henderson is full of it. Moreover, I'd be willing to bet that he knows it. I believe he intentionally tries to continue the snow job that the Fed, the government, and their supporters have dumped on us for decades. Like so many before him, he deliberately uses smoke and mirrors to deceive the public.