Posted on 04/10/2008 5:22:37 AM PDT by ziravan
Is M3 1 really gone?
After reading this little known press release a few weeks ago, I started to wonder… and the surprising result is that (except for the Eurodollars element of M3), the data is still available with which to reconstruct M3.
(Excerpt) Read more at nowandfutures.com ...
The graphs are jaw-dropping. Since discontinuing the M3, the Fed has gone from 3-7% increases in the money supply to 10-11% increases. In the past year, it has been 18%. 18% devaluation of money in a year. Wow. No WONDER there is inflationary concern.
The first tiny hint of this came about two years ago, when I read a report about major real estate transactions in the United Arab Emirates by "tribal leaders" and former Ba'athist Party officials in Iraq -- with U.S. cash serving as the medium of exchange.
ping
The money supply grew 18% in the past year, while our GDP grew at around just 3%, and the entire bond market missed it. You must be making a fortune.
Oh not that inflating our money would produce actual inflation.
(/sarc)
If this is accurate: the games people/government play when nobody is watching...
The Federal Reserve doesn't control M3.
Good post. I suspect that the increases in M3 will be substantially offset by the Monopoly money that vanishes from mortgage backed securities. The invisible hand at work, and all that....
“The Federal Reserve doesn’t control M3.”
Does it matter?
I’m interested in the results, not who to bitch about.
I guess not.
I’m interested in the results, not who to bitch about.
Great. So how do you fix it?
Wow indeed. A roughly 50% increase in the amount of money in just 4 years? To put it mildly: that can’t be good.
Ha! You got the wrong guy. If I knew that I'd already be rich and laying on the beach in the Caribbean!
The graphs you show are for M1, not M3.
M0: Physical currency. A measure of the money supply which combines any liquid or cash assets held within a central bank and the amount of physical currency circulating in the economy. M0 (M-zero) is the most liquid measure of the money supply. It only includes cash or assets that could quickly be converted into currency. This measure is known as narrow money because it is the smallest measure of the money supply....though the contrast of the two is very interesting. What you show is that the amount of practical cash (basically physical cash + debit card "cash") is roughly constant, yet the amount of "money" has shot up about 50% in just 4 years. There's basically $1.5T practical cash, yet the economy thinks there's 10x that invested - and rising very rapidly.M1: M0 + demand deposits, which are checking accounts. This is used as a measurement for economists trying to quantify the amount of money in circulation. The M1 is a very liquid measure of the money supply, as it contains cash and assets that can quickly be converted to currency.
M2: M1 + all time-related deposits, savings deposits, and non-institutional money-market funds. M2 is a broader classification of money than M1. Economists use M2 when looking to quantify the amount of money in circulation and trying to explain different economic monetary conditions. M2 is key economic indicator used to forecast inflation.
M3: M2 + all large time deposits, institutional money-market funds, short-term repurchase agreements, along with other larger liquid assets. The broadest measure of money; it is used by economists to estimate the entire supply of money within an economy.
Small wonder they discontinued publishing M3 when they did. Somebody knew what was coming.
50%. Most people think inflation is simply driven by greed of sellers.
Yeah, I know.
...though the contrast of the two is very interesting. What you show is that the amount of practical cash (basically physical cash + debit card "cash") is roughly constant, yet the amount of "money" has shot up about 50% in just 4 years.
You mean the Fed kept M1 nearly constant and M3 rapidly increased? You might say that the Federal Reserve doesn't control M3.
I give. SOMEBODY controls how how much money there is. I know it’s not Uncle Milty, God rest his soul.
I just know that the gov’t stopped reporting M3. I think that graph is why.
So, who does control the money supply?
~faith.
So, if not the Federal Reserve, who orders the printing of money and the availability of credit that represents additional cash?
Our posts do not indicate the degree of control the feds have over M3. The Federal Reserve obviously controls M1; what involvement the federal government has in M3 is less obvious.
...and while there is certainly a difference between the “Federal Reserve” specifically and the “feds” generally, I’m not sure it matters at this level of discussion.
Is whatever M3 is doing the result of the markets overdoing something, or of the feds manipulating something, or what degree of each?
EVERYBODY controls how how much money there is.
I just know that the gov’t stopped reporting M3.
Yes they did.
I think that graph is why.
Why? You can take M2 and add the extra components needed to calculate M3, just like the chart maker did. It's not a secret. Or a conspiracy.
Read my Wikipedia quote again, carefully.
M1 is the amount of practical cash on hand.
The Federal Reserve has, per Todd’s graph, kept M1 pretty steady.
M3 is basically the book value of all investments.
This includes the prolific activity of borrowing cash to invest, and adding the on-paper alleged value of the investment beyond the borrowed sum.
Oversimplified, for every dollar there are 10 people who think they own that dollar ... and the population of alleged owners is increasing very rapidly.
You might? Why?
Inflation is an invention of the FED, they love it, and as long as they exist we will never not know the stability of our money supply that we had prior to 1913.
Overall Inflation 1789 to 1913 8% Total.
1913 to 2008 2100%+
The FED needs abolished.
From the post by ctdonath2
M0: Physical currency. A measure of the money supply which combines any liquid or cash assets held within a central bank and the amount of physical currency circulating in the economy.
The Fed basically controls M0. The Fed doesn't control how much money you borrow. They can influence that by changing the Fed Funds target or changing the Reserve Requirement.
It’s just strange that they stopped publishing M3, and the recent behavior of M3 gives rise to concern and conspiracies. Yes, the number can be reconstructed ... but now they’re making people work at figuring it out (subject to arguments over how accurate the reconstruction is) which leads to people simply not knowing, broadly unaware that while M1 (total cash) is pretty constant, M3 (total money) is skyrocketing (which I’d call a $1T increase in just 4 months).
Yep. They also dropped the max inflation protection I-Bond from $30,000 per year to $10,000 per year last January 1 so you can't protect yourself even a little.
What did we do to deserve this. Oh I know, conservatives thought we were voting for a conservative.
Because you might want to be correct.
Key word being “influence”. They may not be incontrol, but they’re pretty persuasive - and with M3 doing what it’s doing, we’re wondering what the FR is doing to persuade whom and why.
What makes you think our money supply used to be stable?
Do you think we had no inflation or deflation, year to year, under the gold standard?
Coincides with our becoming the world's policeman. Infation it's what's for dinner war.
They stopped publishing other money supply statistics in the past. Look up L.
So a lot of this may be money that was parked outside of the M indices coming back in.
Facts do:
Inflation from the year this nation was founded to 1913 was a TOTAL of 8%.. not annually, total.
From 1913 to 2007, inflation has been 2100%+ percent.
Sometimes and with a long lag. They barely boosted M0 and from June 2003 to June 2006 moved the Fed Funds target from 1% to 5.25% and inverted the yield curve. Fed Funds was 5.25% until September 2007. What did M3 do from June 2003 to September 2007?
That's very interesting. That's also not the same thing as saying prices were stable from year to year. 5% deflation one year followed by 5% inflation the next year looks good when you average it together. Kinda sucks when you don't.
For all of yall disparagers of gold, this is a pretty good match for the gold price chart with a moving average to smooth the occasional speculation spikes.
Yes, it fluctuates over time, but the overall rate change was 8%... forget ever seeing deflation as long as the Fed exists.
They need to make sure you can’t just stick your money in the ground and know you are fairly safe to dig it up 10 or 20 or 50 years from now and retain the bulk of your wealth.
The fed has removed all true stability from the system, and forced EVERYONE to incur ludicrous risk (compared to the world prior to their existence), just to protect their net worth.
Ya think?
forget ever seeing deflation as long as the Fed exists.
You think deflation is a good thing? What about panics and depressions? Miss those too?
So, you still Googling for an answer to who orders the printing of Federal Reserve Notes if not the Federal Reserve?
You talking to yourself again? LOL!
FWIW: Averaging them together gets you a net loss of a quarter percent.
Yes, prices bounce around a bit year-to-year. That’s normal.
For this discussion, the issue is that M3 is going up - a lot. We’re not talking 5% down one year followed by 5% up the next (a net -0.25%), we’re talking 50% up in just 4 years, enhancing a long-term increase of 1500% over 30 years. That makes an annual ~5% up/down, averaging to 8% over 125 years, look pretty darned stable.
I can deal with prices going up 5% if they’re gonna come down 5% the next year, with the long-term net around 0%.
Up 30% in 1 year, 50% in 4 years, 1500% in 30 years, with no forseeable serious long-term counteracting decline ... not so much.
In other words, you are still just trying to sound knowledgeable about economics but have nothing but a google understanding of it. Done with ya.
Yeah, I know.
Yes, prices bounce around a bit year-to-year. That’s normal.
But is it good? What happened during the panics we had every 10 years or so under the gold standard?
He answered that. _I_ answered that.
The Federal Reserve directly controls M0 (actual cash currency), which practically controls M1 (physical cash + checking accounts).
M3 is the sum of all physical cash, virtual cash, and (here’s the kicker) all investments.
The Federal Reserve does not control investments.
Example (flawed, but gets the point):
- I have a dollar bill. That’s M0.
- I deposit that $1 at the bank.
- The bank marks $1 in my checking account, and marks $1 in physical cash - making the “available money” essentially $2 (I think I have $1, and they have $1 to loan until I want my $1 back). That’s M1.
- The bank loans that $1 cash to you. Now I have $1 on paper, the bank has $1 on paper (you’ll pay it back soon, right?), and you have $1 cash - totalling $3. That’s M2.
- You invest that $1, the investment is good and pays off double, making a 100% profit on paper, giving you another $1. I have $1 in my checking account, the bank loaned $1, your investment made $1, and that physical $1 is out there somewhere - totalling $4. That’s M3.
- Yet for all of this money that everyone thinks they have ($4), the Federal Reserve only printed $1. They didn’t print $3 additionally, it’s everyone else who made arrangements that effectively created $3 on paper.
In the real world, our economic system has created $10 out of each $1 the Federal Reserve printed; the extra $9 is virtual, on paper, the result of contractual games of who says they have the dollar when they’ve really loaned it to someone else.
Corrections. All the paperwork has to be straightened out occasionally. Under a gold standard, that happens every few years. Without the gold standard, we can push off the “corections” a lot longer ... but they add up and will hit all at once. ...and that’s the problem: M1 looks fine, but M3 is getting _way_ out of whack in relation to M1, and at some point a whole lotta trillions of virtual dollars will have to be accounted for, discovered to not exist, and a lotta people & businesses will go under.
M3 can go up relative to M1 only so long as nobody says “show me the money”. It’s like musical chairs: there’s enough chairs (cash) so long as there isn’t a simultanious demand for them; when the demand hits, someone’s outta the game.
Um...you’re the one not showing an understanding of the difference between M1 and M3.
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