Here is a really interesting article:
mensnewsdaily.com
<<<Hidden from many investors is the fact that the stock market rallies of 2003-2004 were fueled, in part, by the massive infusions of money into the money supply by the Fed, especially whenever the market stumbled and faltered. In February 2006, the Fed will stop publishing the M-3 data for the first time since the Federal reserve system was established in 1913. The timing of when M-3 data becomes hidden from the public also coincides withIran's waging a monetary war against the U.S. Petro-Dollar by trading its oil in Petro-Euros on its new Iran Petroleum Exchange beginning its operations in February 2006. If a substantial amount of oil transactions are suddenly conducted in Euros, it should put pressure on the Dollar as oil traders exchange Dollars for Euros, making the Dollar a less desired, less valuable currency. This, in turn, would make it more difficult for the Fed to print all the dollars it wants, without driving the value of USD down against other worlds' currencies. If the Dollar begins to drop, it may trigger a sell-off in treasury bonds, thus exacerbating the inversion of the yield curve. If treasuries sink, the current housing-driven economic boom may turn into a gloom.
I have two theories about M3 neither of which is remotely close to what everyone thinks
1) The FED really does find it useless and that is why they stopped publishing it. I spoke to Kasriel about this and he agrees. However we both agree that the timing of the cancellation is suspicious. That leads us to .....
2) The FED stopped publishing M3 because it is likely to implode in 2006 not explode. When you realize M3 measures credit and lots of things that are double counted, and not just money, then why can't credit implode in a big recession, perhaps shockingly so
I think one or both of those is correct, perhaps #2 not by conspiracy but simply because the FED does not see what is coming. Least likley to me is what everyone believes: the FED purposely wants to hide some mammoth upcoming explosion in credit. I say we already had it.
Mish |
