Posted on 11/11/2005 2:49:39 PM PST by AdamSelene235
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).
Seriously, I don't know what this means but want to.
It's a conspiracy! Run for life!
What is the rationale behind ceasing publication of M3? Any idea of either the actual or purported reason?
Don't worry soon it won't exist all.
Thanks.... any chance of finding a similar chart (over similar time span) of the total for Eurodollars?
I've seen no explanation and no press on the subject.
I believe the current experts at the Fed do no believe monetary aggregates are relevent to managing the money supply.
Mr. GREENSPAN. Let me suggest to you that the monetary aggregates as we measure them are getting increasingly complex and difficult to integrate into a set of forecasts.
The problem we have is not that money is unimportant, but how we define it. By definition, all prices are indeed the ratio of exchange of a good for money. And what we seek is what that is. Our problem is, we used M1 at one point as the proxy for money, and it turned out to be very difficult as an indicator of any financial state. We then went to M2 and had a similar problem. We have never done it with M3 per se, because it largely reflects the extent of the expansion of the banking industry, and when, in effect, banks expand, in and of itself it doesn't tell you terribly much about what the real money is.
So our problem is not that we do not believe in sound money; we do. We very much believe that if you have a debased currency that you will have a debased economy. The difficulty is in defining what part of our liquidity structure is truly money. We have had trouble ferreting out proxies for that for a number of years. And the standard we employ is whether it gives us a good forward indicator of the direction of finance and the economy. Regrettably none of those that we have been able to develop, including MZM, have done that. That does not mean that we think that money is irrelevant; it means that we think that our measures of money have been inadequate and as a consequence of that we, as I have mentioned previously, have downgraded the use of the monetary aggregates for monetary policy purposes until we are able to find a more stable proxy for what we believe is the underlying money in the economy.
Dr. PAUL. So it is hard to manage something you can't define.
Mr. GREENSPAN. It is not possible to manage something you cannot define.
Maybe the M3 counter couldn't keep up with the government printing presses.
Apparently nothing worth monitoring.
I think you have hit on something!
Damn bloody suspicious that this was announced the day before a long weekend for the banking system.
The graph above shows the growth in M3, which has grown by about 4x since 1980. What this means is a subject of debate and concern. On the one hand simpletons like me say OK, so money has grown by 4x, but supposedly monetary growth is linked to growth in output (like the GDP), and using the "broadest" measure of that it hasn't even doubled.
This would tend to indicate that the government (actually the Fed) is 'running the printing presses non-stop'. This, one would expect would lead to inflation. (More money chasing the same amount of goods an services.)
We are seeing inflation in the government reported inflation statistics now. There are some who think that the way the inflation statistics are put together is, umm, lets say "favorable" to presenting a low inflation story when in fact real inflation is higher than that.
The Feds job is to keep everyone believing that the US Dollar is worth a dollar (or 98c compared to last year at the new Fed chairmans targeted inflation rate of 2%). Apparently such M3 was no longer useful to this core mission, as it was easily mininterpreted by those of us with only rudimentary understanding of macro-economics. So it has been retired. They have also retired some of the compoents so that we can't unofficially reconstuct it.
May the M3 rest in eternal peace in the land beyond the clouds where no-longer-useful measures go.
Some othere measures that are being considered for retirement:
Casualties of War
The Deficit
The Public Debt
Number of Witnesses who Fled the Country to avoid Testifying in Clinton Era Scandals
Number of government employees
Average percent of salary paid to government employees at retirement
Social Security projected shortfall
From the governments point of view I'm not sure any of these are useful, either.
Voted funniest thread that started with monetary policy.
Why bother with any static definition for the money supply?
Seasonally adjust it [and don't disclose the formula for the adjustment.]
Adjust it for velocity [and don't disclose the formula for the adjustment.]
Give each of the components of the M3 aggregate a different weighting [depending on the desired outcome ... and don't disclose the formula for the adjustment.]
When the verdict is in what are the chances that Greenie will still be the "Maestro"?
How do you say "Maestro" in Manderin Chinese?
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