>>What is in M3 that is not refleected by M2 or M1?<<
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Scroll down and you'll get the definitions of M1, M2 and M3.
March 23 is the date when the Fed plans to discontinue the reporting of the M3 monetary aggregate, large-denomination time deposits, repurchase agreements and Eurodollars.
When debt, from whatever source derived, becomes unsustainable, a Central Banker has two choices. Paul Volcker chose to let interest rates reflect the true state of financial affairs and wear the inevitable economic recession. Ben Bernanke will NOT do that. Instead, he will stand in the breach and monetize the Treasury debt by exchanging it directly for Federal Reserve Notes. If there was an M3, that would have made it explode upwards. But after March 23, 2006, there won't be one.
The purpose of all this is simple. After March 23, 2006, the Fed can go right on inflating but will able to HIDE what it is doing. The US government is ever more dependent on the world's foreign investors, just as their appetite for Treasury securities is fading.
The US current account deficit is approximately 6.3% of GDP. That has to be funded on top of the US Treasury's budget deficits. Stop the flow of foreign funds and the US economy contracts by 6.3%. If these external funds don't arrive as loans, the only other "option" in lieu of a US recession is for the Fed to "create" these funds. If they do that, the US M3 will explode. That is why the Fed wants to hide it.
The Federal Reserve is trying to disappear behind a curtain - for very good monetary reasons. The US "broad money" measure (M3) has increased from $US 6.5 TRILLION to $US 10 TRILLION over the past FIVE years! That is an increase - and an inflation - of 53.8 percent in the US "stock of money" over those five years. And THAT, in turn, is the "monetary illusion" inside which Americans have been living. They have seen the "value" of their house climb as they saw their country's trade and current account deficits explode and the debt owed to the rest of the world climb ever higher as many of these "new" Dollars flowed out.
Don't doubt it - this move by the Fed will have global effects. This is because the many other nations around the world with inflated paper money and credit money systems and budget deficits to match will see this as a precedent. They will lose no time in joining in, hiding their own monetary inflations, credit expansions and budget deficits by no longer reporting the data. After that, the whole world will be flying blind. That will be when rumours become a form of "currency" in their own right.
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