Comments on: The Real Reason Why M3 is Abolished

By: rio bouygues

rio bouygues — Thu, 27 Oct 2011 03:23:03 +0000

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By: La Tina Lewis

La Tina Lewis — Thu, 12 Aug 2010 22:52:02 +0000

Steve!! your absolutely right about much of the money suppy moving around electronically, just FYI, money that moves from one checking acount “your employer’s” to your account “employees” is still part of the M1 money supply. Paper & coins currency (liquidity, cash), saving deposits, & checkable deposits are all counted in the primary money supply(money kept in commerical banks). So despite how money moves around its all relevant!

By: Dennis

Dennis — Thu, 10 Jun 2010 19:38:33 +0000

In regards to the request for the Fed announcement regard collection cost for M3 data… here is the link:

http://www.federalreserve.gov/releases/h6/discm3.htm

By: whit3hawk

whit3hawk — Sat, 23 Feb 2008 21:39:53 +0000

If you follow a chart of the growth of M1, M2, M3 moving simultaneously you can see how increases in M2 and M3 have later translated into increased in M1, and M2.

It stands to reason that when a CD and other large time deposits expire, some will be re-invested, but even the small percentage that moves into M1 and M2 is enough to become an unpredicted or unforeseen inflationary factor, if M3 isn’t in the equation at all. So inflation at M3 will show up in some proportionate way in M2 and M1 somewhere down the line. (looking at a chart, about 2 to 5 years).

But maybe the Fed doesn’t need that because they are not really able to manage what’s happening, anyway, with all they do already… we still have economic chaos.

By: whit3hawk

whit3hawk — Sat, 23 Feb 2008 21:30:18 +0000

If you follow a chart of the growth of M1, M2, M3 moving simultaneously you can see how increases in M2 and M3 have later translated into increased in M1, and M2.

But maybe the Fed doesn’t need that because they are not really able to manage what’s happening, anyway, with all they do already… we still have economic chaos.

By: Jeremy

Jeremy — Mon, 07 Jan 2008 19:42:23 +0000

All increases in the money supply fuel inflation, both in the short and long run (the full effect isn’t felt for quite a bit) – just as all increases in the money supply distort the productive stages of the economy, causing imbalances and setting off economic cycles – the larger the relative increase in the money supply, the bigger the boom and subsequent bust.

The Fed deciding to stop measuring M3 shows the extent of their actions to harm the economy in the long term. If you look at the growth over the last 25 years, you can see that M3 doubled in the first 15 years, and more than doubled (almost 2 1/2 times) M3 in the last 10 years it was measured.

Which shows just how inflationary, and unbalancing to the overall productive structure of the economy, the Fed has become.

By: jon

jon — Sat, 08 Dec 2007 00:35:06 +0000

to mike sprawl.

you seem quite intelligent and like you know what you are talking about, so i will ask you the following and since it is now the subject of this blog feel free to email me at jonathanvines@hotmail.com if you would be so inclined.

i believe i understand how the fed gives out loans but they seem to only for 14 days from what i can gather, how does money perminatly enter the market?

By: Mike Sproul

Mike Sproul — Tue, 18 Sep 2007 05:23:05 +0000

The only kind of money the Fed should be interested in is the money the Fed itself issued. Paper dollars and Federal funds are issued by the Fed, backed by the Fed’s assets, and if necessary, can be retired by the Fed. Checking account dollars issued by Bank of America, savings account dollars issued by Wells Fargo, credit card dollars issued by Mastercard, Disney dollars issued by Disney, etc., are the liabilities of the firm that issued them. The quantity of these “derivative dollars” does not affect either the Fed’s assets or the Fed’s liabilities, so it does not affect the value of the Fed’s dollars. The Fed therefore has no reason to be interested in the quantity of private moneys that have been issued.

Please Google “real bills doctrine” before posting any knee-jerk Austrian reactions to the above.

By: Travis

Travis — Tue, 18 Sep 2007 03:28:12 +0000

The sad thing is most Americans couldn’t tell you what the M3 numbers are. They don’t understand their banking system. They can tell you all about their favorite football team or race car driver, but they are clueless to the most important system that exists in their lives.
We will all end up paying for this stupidity for many years to come.

By: billwald

billwald — Mon, 16 Jan 2006 07:34:17 +0000

The Fed has the ability to make thing worse for working class but not better. Why? Because the international value of the dollar is set by the international markets, not the Fed. In other words, the govt can make the system less efficient but not more efficient.

The rich class (old money)? Nothing has harmed them since the Russian Revolution.

By: Jon Roth

Jon Roth — Mon, 16 Jan 2006 07:01:40 +0000

I don't know where the press release is, but the prudent investor has a good post on the cost savings, a whopping $1.5 million or .00000699% of their budget http://prudentinvestor.blogspot.com/2006/01/discontinuance-of-m3-will-save-fed.html This is like a person who makes $100k a year being concerned over a 70 cent candybar purchase.

By: Stefan Karlsson

Stefan Karlsson — Mon, 16 Jan 2006 03:18:02 +0000

Mr. “Guy who reads fed releases”, exactly where can you find that Fed press release where they say they discontinued it because of data collection costs (complete BS btw)? In the announcement that I link to none of this is said and on the Fed’s list over all press releases I can’t find anything either.

And, Steve, electronic money is as much money as paper money. In fact the data that will be “discontinued” is only data over electronic money, whereas statistics over paper money will continue to be issued.

By: Tom

Tom — Sun, 15 Jan 2006 14:57:07 +0000

Steve,
Although your paycheck is transferred to you electronically, it sits in your bank account as a demand deposit. Demand deposits are part of the M1 money supply, which includes currency, traveler’s checks and demand deposits.

Price inflation can be caused by increasing not only the currency but especially by increasing demand deposits through open market operations.

By: Guy who reads fed releases

Guy who reads fed releases — Sun, 15 Jan 2006 13:53:28 +0000

But the Fed did give a reason. Its not like the M3 stats were supossed to be released one day and they just didn’t appear. The Fed announced the discontinuation and said they were doing so because of the cost of collecting the data. You may believe them or not but they were not silent on the matter

By: Bruce

Bruce — Sun, 15 Jan 2006 01:41:10 +0000

Put another way, electronic cash represents represents a claim to wealth just like any other form of cash. To increase claims to wealth relative to real wealth only results in cheapening the claims regardless of form.

By: vincent poncet

vincent poncet — Sat, 14 Jan 2006 22:04:20 +0000

Also, to manipulate the reference interest rate of the money, the central bank make intervention on the short term money market. They create money out of thin air, and sell it on the market in order to lower the market interest rate of money to the rate they want.

By: vincent poncet

vincent poncet — Sat, 14 Jan 2006 21:58:20 +0000

No, money supply apply to all form of money, not only paper money. In fact, paper money only represent a tiny part of all total money in circulation.
When a bank open a credit line at the FED, the FED create money out of thin air and “deposit” it on the account of the bank. In this case, it’s a money creation of electronic money.
Bank : “Hello FED guys, I want money”
FED : “ok, how much you want ?”
Bank :”10 millions $”
FED :”ok, no problem, I just write it on your account”
Bank :”That’s so cool to be able to get so cheap money….”

By: Steve

Steve — Sat, 14 Jan 2006 20:51:02 +0000

I’m not sure how money supply is all that relevant in the age of electronic money. My paycheck is electronically deposited, my taxes are electronically done, and many of my purchases are done electronically. Where is the money supply for that?

Now, I understand how increasing the money supply fuels inflation. But that applies to paper money. The problem here in the 21st century is that the money supply is becoming less and less relevant as electronic money starts to dominate economic activity.