Posted on 02/28/2006 7:41:17 AM PST by vrwc0915
At a time when money supply (link to Wikipedia) has been exploding and weekly figures provide a nasty experience week after week, month after month, the Fed put out a short, flat notice last Thursday, saying that it will discontinue publication of M3 figures after March 2006. Such a step may fit in the policy of the current Bush administration but certainly not a supposedly independent central bank. M3 is the most important money aggregate for economists, analysts and Fed watchers to get an idea at what 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 by 40%. 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% despite all hedonic adjustments? Torture threats against people insisting to get the whole picture?
US Investing Will Become A Fly By Night Adventure 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.
Possession is 9/10 and if you don't hold it you don't own it. Paper is useful to write on and for cleaning up when using the head
Just one last comment: I think the country is starting to suffer from information overload and major distortions of information because of too many uninformed and unprofessional news sources. Everybody thinks they're qualified to write about geopolitical events, politics, and economics, and not everybody is qualified. There's so much distorted, inaccurate information being tossed out by bloggers, radio shows, and especially left-wing activists. People write stuff in their blogs and publish it immediately on the web before they've even studied the issues. For example, Michelle Malkin is a great lady and very corageous but I don't think she understands this UAE port deal in detail and she's publishing commentary based largely on emtion without understanding that acquisition.
Could you explain? What is has to do with the publication of M3 figures?
I don't know about the M3 data. There may be solid technical reasons why it's not a good measure of money supply or it's not very meaningful. It may be a wise decision not to publish it; no information is better than distorted or meaningless disinformation. For example, the offical reported US "savings rate" doesn't include pre-tax 401K and IRA contributions, so it's a meaningless number and we might be better off if the government stopped publishing that number and invented a more accurate calculation of savings that includes 401K and IRA contributions.
I didn't read it in detail, but my first impression of that blog is that it has some overly alarmist, overly pessimistic editorials based on a lack of understanding of how our economy and financial system operates.
No, just don't publish meaningless statistics that amount to disinformation.
Captain Edward John Smith aboard the "unsinkable" Titanic.
I don't get the relevance of the first graph. I'd like to know the burden of servicing our debt on our budget, compared to historical debt burden. I bet it's low/average.
As a financial professional do you believe M3 is a meaningless statistic ?
PMs are at a stable high. Silver may cross $10 very soon.
Hahaha. That's great!
I'm just amazed that folks come on and DEFEND the stopping of publishing the M-3 data!
This is like a ship turning off the radar repeater in the passenger lounge, lest it frighten the passengers.
This is a stupid chart. It double or triple counts some debt. If you take out a car loan from GMAC and GMAC sells a bond to pay the auto seller, that debt is counted twice. And why no chart of assets? And why compare this debt number against a yearly number?
If I make $50,000 a year and get a 30 year mortgage for $200,000 my debt is now 400% of my GDP. Is that good or bad? I guess it depends on whether I want to sell you a big ass hunk of gold!!
I guess the rose-colored glasses pom-pom girls who pop up here are trying to sell a few more houses before the bust.
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