A different take on M3
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I keep getting questions about the FED no longer publishing M3 numbers.
Like nearly everyone else, I am suspicious of the cancellation of the M3, especially the timing of it right before $Ben Bernanke takes over for Greenspan. At the same time however, I happen to agree with the FED that the number is (or at least was) more or less useless.
But why now?
Surely they had to think this would cause all sorts of speculations and conspiracy theories running rampant.
Let's take a step back and consider other numbers.
Does anyone believe the reported GDP? The CPI? The unemployment rate?
Raise your right hand right now if you think all three remotely accurate.
Hmmm. I don't think there are any hands in the air.
That said, just because a number is totally nonsensical does not mean it is useless.
Take GDP for example. If you subtract out hedonics and imputations our GDP might be 2-3% lower. If you see 4% and think 2% you are probably closer. If you see a GDP under 2% we are likely near a recession if in fact not in one. Perhaps someone has a reason to see M3 figures for the same reason.
The problem is, even IF the FED is about to hide something, it could be some sort of implosion as opposed to explosion. Who knows? It all makes for good fodder and many have written about it already. To the best of my knowledge I am the only one that has proposed they might be attempting to hide an upcoming implosion of some sort.
Personally, I don't see a reason to watch M3. I have also spoken to Paul Kasriel about this and he prefers to watch M2.
Still, like me Kasriel was wondering "Why Now?"
This could be a case of much to do about nothing, or it could be a case that it is in fact the very opposite of what everyone is suspicious about. I tend to think that it is one of those choices as opposed to the nearly unanimous opinion of an upcoming $Ben fueled explosion in M3, but admittedly I do not know which one. Since about 99% of M3 watchers feel otherwise, I am reasonably confident of my stance.
Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/
