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Federal Reserve money supply report about to fall into the abyss
By
Harlan Levy
Journal Inquirer, Manchester, Conn.
Wednesday, November 30, 2005
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, andcertificates 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 theanalysts'
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.
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