Federal Reserve money supply report is about to fall into the abyss by Harlan Levy
In a little-noticed decision a few weeks ago, the Federal Reserve Board said it would stop publishing its weekly M3 money supply number as of next March, although it will continue to publish M0, M1, and M2. M0 is all coins and paper bills. M1 is M0 plus all checking accounts. M2 is M1 plus savings accounts, money market accounts, and certificates of deposit of less than $100,000. M3 is M2 plus all deposits, euro dollars, and repurchase agreements that are $100,000 and larger.
(A repurchase agreement is a short-term sale and subsequent repurchase of securities by a bank or other financial institution.)
M3 is the broadest measure of how much money is circulating in the U.S. at any one time. Unlike M2, M3 is the big stuff, the super-size deposits.
"M3 shows intervention and big money movements," Bill King says in The King Report says.
But why should you care?
Actually a lot of you should -- those who own stocks, and that amounts to about half of all U.S. households.
Now back to M3: I asked the Federal Reserve Board why it will stop publishing M3.
"Our searching of the economic literature revealed that very few economists used that aggregate," the Fed responded, adding that "M3 does not appear to convey any additional information about economic activity that is not already embodied in the M2 aggregate. Further, the role of M3 in the policy process has diminished greatly over time. Consequently, the costs of collecting the data and publishing M3 now appear to outweigh the benefits."
Some financial analysts disagree violently.
"They know what's coming -- massive amounts of dollar creation to fund the worsening trade and federal government budget deficits," says James Turk in the Free Market Gold & Money Report.
"There is only one reason for the Fed to conceal important monetary component information," The King Report says. It's "to cover up the truth about what the Fed, central banks, and the really big money are doing."
The Fed, central banks, and other groups are informally known as the "Plunge Protection Team."
The reason the Fed will stop publishing weekly M3 totals, says financial analyst Robert McHugh Jr., is "so that the Plunge Protection Team can hide its market manipulative equity-buying activities."
The PPT is poised to buy stocks and do it secretly, McHugh says, "to stop the higher-than-normal probability that the market could crash."
McHugh surmised this in October, "because of the M3 numbers. We could see there was too much money being created. ... M3 was being pumped at three times the rate of growth" of the Gross Domestic Product.
Unlike M2, M3 includes items that are the most obvious signs of PPT market-buying transactions, McHugh says. "If they no longer report this item, folks like us who monitor the growth of M3 for clues as to when the PPT is likely to buy the market will have a harder time reporting that fact. Investors will be left more in the dark as to any secret rigging of the stock market."
A possible market crash is only one reason for secrecy, McHugh postulates. "Is the economy closer to the brink than anyone realizes? Or is it politically expedient to goose markets? Do the corporate elitists want the big payback for backing the powers that be and insist upon a rising market into year-end?" he asks. "Do they see a catastrophe coming that will require hyperinflation to bail the U.S. out? Maybe."
But the "master planners" do not believe in the forthright flow of information, McHugh says. "They believe that bad news cannot be handled by the flock, that confidence must be boosted at all costs, even if it entails manipulating the markets."
As the King Report puts it, "Am I suggesting there might be something of a nefarious nature going on here? I certainly am."
Making large stock purchases secretly, McHugh explains, can be enough to spark a rally, and when the buying gets heavy, the PPT can get out at a nice profit before the market resumes a slide, along with "their Wall Street friends who took the risk and bought with them early," leaving many investors high and dry.
It doesn't take much to realize that if investors like you and me don't know the reality of what's happening in the market and the economy because of deception, we can make some very bad decisions.
The Fed, in its response, did not answer my question asking if the analysts' suspicions were true.
But that doesn't mean we as citizens cannot ask those in Congress to find out the reason for the Fed's move. If it is suspicious, maybe it's possible to stop it. At least we should get a full answer.
Harlan Levy is a Journal Inquirer staff writer.
01 December 2005
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