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M3 is the most important money aggregate for economists, analysts and Fed watchers to get an idea at what the speed the (electronic) printing press is running. The European Central Bank (ECB) honors this set of data with a special press release every month. So much about transparency.
GRAPH: Recent M3 figures are certainly unpleasant and worrisome. M3 has been growing at an annual rate of 7.5 percent or double the most recent rate of GDP growth (subject to a revision.) Since Bush took office money supply M3 has risen 39.2%. The Fed prints it and the government spends it as can be seen by growing government participation in growth numbers. I am still shocked and in a state of disbelief that gives place to being disgusted about the new style. What will be next? Discontinuation of industrial production figures below zero? The consumer price index (CPI) being treated as a national secret once it rises above 5%? Torture threats against people insisting to get the whole picture?
No! First comes the discontinuation of more important data releases. No more repo data, no more Eurodollar data, no more large time deposits. Investing will become a fly by night adventure. From the Fed website (saved locally for later reference): On March 23, 2006, the Board of Governors of the Federal Reserve System will cease publication of the M3 monetary aggregate. The Board will also cease publishing the following components: large-denomination time deposits, repurchase agreements (RPs), and Eurodollars. The Board will continue to publish institutional money market mutual funds as a memorandum item in this release. Measures of large-denomination time deposits will continue to be published by the Board in the Flow of Funds Accounts (Z.1 release) on a quarterly basis and in the H.8 release on a weekly basis (for commercial banks). Take note that only publication, but not calculation of these figures will be discontinued. I strongly hope that Ben Bernanke will revise this decision, being an economist who knows that sound research can only be done on the basis of data. Looking back into history economic data was only kept a secret in failing economies, e.g. the Soviet Union As this data is published by the board of governors of the Fed every one of their words will have to be scrutinized most carefully in the future and tested for credibility. Words are easy, but I prefer hard data. No prudent investor will navigate his funds through a foggy world but lie at anchor below a clear sky, meaning: elsewhere. For further information read "If it weren't that cheap to print them greenbacks" and "M3 and public debt hit record highs." Once you read this you may be in the mood to read "US AAA rating - how much longer?"
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Straka The opinions of FSU contributors do not necessarily reflect those of Financial Sense. |
