Please, forgive the shameless self-promotion, but, in an expanded response to a friendly enquiry, I put together a list of the ulterior motives which might explain why the Fed has suddenly decided to stop publishing M3 data next March.
If nothing else, the piece seems to have been taken up as a navigational warning of the looming economic icebergs which the Arch Counterfeiter and his political masters on the bridge of the USS Titanic will have to try to avoid next year.
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I have tried not to indulge myself by ascribing conspiracy theories and evil ulterior motives for the FEDs discontinuation of reporting M3. However, I have been unable to conceive myself, or have read any innocent motive conceived by others, for the FEDs action. We are left having to believe the worst.
I agree with Yancey Ward. It seems to me that M3 is one of the harder numbers to fake, making it a little bit lonely swimming around with all the bogus but highly-touted numbers like GDP, CPI, and the rate of unemployment. This is starting to smell like an end-game to me …
There isn’t a conspiracy at all. The Fed is simply eliminating statistics that could make it’s decisions to keep stealing (expanding the money supply) from lendors and consumers.
The way the whole mess is structured the Fed does not have to give a reason for anything nor is any decision outside of internal fraud illegal. So there really isn’t a conspiracy because there simply can’t be one.
Here’s an alternative view by Doug Noland.
The Fed gave me the following answer:
M3 does not appear to convey any additional information about economic activity that is not already embodied in M2. Academic papers have occasionally used M3 in empirical work, but these studies have not concluded that M3 is an important financial indicator.
In addition, the role of M3 in the policy process has diminished greatly over time. M3 is not closely tracked by policy makers nor is it routinely analyzied by Federal Reserve System staff.
Consequently, the costs of collecting the data and constructing and publishing M3 now appear to outweigh the benefits.
You also mentioned that the ECB looks at M3. It is hard to do a straight mapping from euro-area M3 to a U.S. monetary aggregate. If we tried to do a mapping, euro-area M3 would be somewhere between M2 and M3 in the U.S., with a few components not in U.S. M3. Two components of euro-area M3 that are not in their M2 (repurchase agreements, debt securities issued with maturity up to 2 years) are pretty small compared with other parts of their M3. Money market funds are sizable, but we are not eliminating them from our H.6 release. In a sense then, euro-area M3 has a great deal of overlap with U.S. M2.
Ohhh Henry,
Thanks for pointing out Noland’s opinion. If he thinks M3 really isn’t worth it, then I will trust his opinion.
Charles Goodhart, of the Bank of England, had the following to say regarding a central bank’s ability to fight “bad” deflation. Nothing new here for Austrians, but significant given that this was a paper presented at conference held by the BIS in June – peopled by a number of big-hitters from the world of fiat money and entitled: “Understanding Low Inflation and Deflation”………………………………………… “If pursued resolutely, there is no reason to doubt that direct intervention by the central bank in the property (equity) markets could prevent “bad” deflation persisting. Once more we conclude that “bad” deflation is easily curable in principle in a fiat money system. Its persistence is a symptom of selfimposed constraints on central bank expansionary actions”………………………………………..
http://www.bis.org/publ/work189.pdf …………………………………………..
… so maybe the conspiracy theories about the Fed’s decision to stop publishing M3 should add that increased RPs might conceivably involve REIT and ETF buying, not just that of USTs & Agencies (the Plunge Protection Team, indeed!)… and that intervention to sell the USD might also want to be temporarily masked as the proceeds would presumably show up in the expanded Eurodollar liabilities and the large-scale time deposits held at the dollar buyers’ correspondent banks.
Hi, Does anyone know what M3 is estimated to be right now? It doesn’t have to be exact. Does anyone keep track of it anymore?
and
What percent of our total money suppy are the banks collecting interest on? Is it 100%? Or is it everything but M0? If so what percent is M0? And if the government sells bonds to the Fed who buys it with a magic checkbook which then uses it as reserves in order to create Federal Reserve Notes, then can we conclude that we are paying interest on M0? What happens when the bonds used to generate new currency matures? Does that mean that those Federal Reserve Notes truely do not have interest on them anymore? But how did we get the money to pay back the bonds? I suppose that money could have been generated by a commercial bank in the form of a loan and then collected as taxes. Any help on understanding this would be appreciated. A phone call would also be appreciated at six one two – two four seven – twentyone hundred. (not sure if I should be publishing my phone number).
Hi, Does anyone know what M3 is estimated to be right now? It doesn’t have to be exact. Does anyone keep track of it anymore?
and
What percent of our total money suppy are the banks collecting interest on? Is it 100%? Or is it everything but M0? If so what percent is M0? And if the government sells bonds to the Fed who buys it with a magic checkbook which then uses it as reserves in order to create Federal Reserve Notes, then can we conclude that we are paying interest on M0? What happens when the bonds used to generate new currency matures? Does that mean that those Federal Reserve Notes truely do not have interest on them anymore? But how did we get the money to pay back the bonds? I suppose that money could have been generated by a commercial bank in the form of a loan and then collected as taxes. Any help on understanding this would be appreciated. A phone call would also be appreciated at six one two – two four seven – twentyone hundred. (not sure if I should be publishing my phone number).
Hi, Does anyone know what M3 is estimated to be right now? It doesn’t have to be exact. Does anyone keep track of it anymore?
and
What percent of our total money suppy are the banks collecting interest on? Is it 100%? Or is it everything but M0? If so what percent is M0? And if the government sells bonds to the Fed who buys it with a magic checkbook which then uses it as reserves in order to create Federal Reserve Notes, then can we conclude that we are paying interest on M0? What happens when the bonds used to generate new currency matures? Does that mean that those Federal Reserve Notes truely do not have interest on them anymore? But how did we get the money to pay back the bonds? I suppose that money could have been generated by a commercial bank in the form of a loan and then collected as taxes. Any help on understanding this would be appreciated. A phone call would also be appreciated at six one two – two four seven – twentyone hundred. (not sure if I should be publishing my phone number).
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