Fed not publishing M3????

Discussion in 'Wall St. News' started by citizennobody, Apr 29, 2006.

  1. Am I reading this article correctly, I can't seem to find any primary sources to this. If it isn't true, oh well, but if it is true :eek: :eek: :eek: :eek: .


    MUMBAI: On March 23, unnoticed by many, the US Federal Reserve quietly stopped publishing the quantum of broad money (referred to as M3) in the US economy.

    Simply put, this meant the central bank will not reveal the amount of currency it pumps into the system each year. So, it will now be impossible to distinguish dollar inflows to US economy and new currency that the Fed would print.

    So, the Fed, fear analysts, could covertly fund its near $800 billion budget deficit and $700 billion balance of payment deficit, which are more than India's GDP.

    These fears have prompted the dollar to plummet to multi-month lows against euro and yen and could seriously impact confidence in the world's favourite currency.

    A European think-tank has likened the cessation of M3 publication to Richard Nixons unilateral decision to suspend the convertibility of the dollar into gold in 1971.

    "In 1971, the dollar became a currency solely based on the rest of the world's confidence. But this confidence mostly relied on the general feeling that US economy and its currency were managed transparently. With the end of M3 publication, this transparency disappears completely.

    The US now wants the world to trust their word, even in the field of their currency's value. In a world where the confidence in US has never been so low since 1945, the dollar is thus turned into the central player of the beginning global systemic crisis,"according to E2020 - European Political Anticipation.

    "A falling dollar is the greatest threat to the world economy,"says Pradip Shah, who heads private equity firm IndAsia. Shah said the possibility of US slipping into a recession was unlikely.

    Experts in US have already started voicing their concern about the economy in spite of robust growth figures in the first quarter.

    A US media report on Monday even suggested that the biggest unknown about America's next economic meltdown is not 'if' but 'when' it will come.

    Commentators have pointed at a housing bubble that is threatening to explode.This isn't very good news for emerging markets like India, which has America as its biggest trade partner.

    The dollar's status as a safe-haven currency has been a matter of comfort for many global investors while foraying into new territories as they could always rush back to the greenback if anything went wrong.

    If that confidence is lost, as E2020 believes, many investors would think twice before buying assets in risky emerging markets.

    Such a situation could also dent the Indian equity story, which rewrote records last week when the BSE's 30-share sensex climbed a 1000 points in 19 days or an unbelievable return on investment of 10% in just over a fortnight.

    "Nobody believes in the dollar any more. That is why fund managers are moving to commodities like gold, silver and even oil,"an adviser to a hedge fund told TOI.

    Fed chairman Ben Bernanke is said to be in favour of a lower interest rate regime. However, runaway inflation and ballooning debt have forced the Fed to increase interest rates 15 times this year with another expected at a policy-setting meeting in June.

    Higher interest rates could slow economic growth but keeping them low could stoke long-term inflation, leading US to an economic precipice.

    A similar situation in the late seventies and early eighties had forced the then chairman Paul Volcker to radically alter Fed policy to toe the line of monetarist Milton Friedman, who advocated controlling inflation by tightening money supply.
  2. HA....found it!!!!!!!!!


    Discontinuance of M3
    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).

    M3 does not appear to convey any additional information about economic activity that is not already embodied in M2 and has not played a role in the monetary policy process for many years. Consequently, the Board judged that the costs of collecting the underlying data and publishing M3 outweigh the benefits.
  3. Scope of monetary aggregates

    Because (in principle) money is anything that can be used in settlement of a debt, there are varying measures of money supply. The narrowest (i.e., most restrictive) measures count only those forms of money available for immediate transactions, while broader measures include money held as a store of value. The most common measures are named M0 (narrowest), M1, M2, and M3. In the United States they are defined by the Federal Reserve as follows:

    M0: The total of all physical currency, plus accounts at the central bank which can be exchanged for physical currency.
    M1: M0 + the amount in demand accounts ("checking" or "current" accounts).
    M2: M1 + most savings accounts, money market accounts, and certificate of deposit accounts (CDs) of under $100,000.
    M3: M2 + all other CDs, deposits of eurodollars and repurchase agreements.
    As of March 23, 2006, information regarding M3 will no longer be published by the Federal Reserve. The other three money supply measures will continue to be provided in detail. On March 7th, 2006, Congressman Ron Paul introduced H.R. 4892 in an effort to reverse this change

    Federal Reserve use of repos

    Repurchase agreements when transacted by the Federal Open Market Committee of the Federal Reserve in open market operations initially add reserves to the banking system and then withdraw them; reverse repos initially drain reserves and later add them back.

    Under a repurchase agreement ("RP" or "repo"), the Federal Reserve (Fed) buys US Treasury securities, U.S. agency securities, or mortgage backed securities from a primary dealer who agrees to buy them back, typically within one to seven days; a reverse repo is the opposite. Thus the Fed describes these transactions from the counterparty's viewpoint rather than from their own viewpoint.

    If the Fed is one of the transacting parties, the RP is called a "system repo," but if they are trading on behalf of a customer (e.g. a foreign central bank) it is called a "customer repo." Until 2003 the Fed did not use the term "reverse repo" - which it believed implied that it was borrowing money (counter to its charter) - but used the term "matched sale" instead.
  4. We are f#cked....

    I think Gold and precious metals plus real assets are going to rocket......GOLD $1800/oz anyone?
  5. I would say GOLD $11367/oz and DJI $250 in about 3 to 5 years from now.
  6. http://www.elitetrader.com/vb/showthread.php?s=&threadid=58711&highlight=m3

    I do find it of some interest that the most recent leg of the run-up where gold cracked USD 550 started on 3/23 (the day of M3 discontinuance). Ditto for the run up in yields on the 30 year bond.

    Stupid policy decision, or a sophisticated means to devalue the USD, restore competitiveness and restore risk premiums?
  7. duard


  8. opm8


  9. I think it is the begining of the end for the USD.
  10. Question: would devaluing the dollar stop outsourcing to foreign countires?
    #10     May 1, 2006