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To: Abner Hosmer who wrote (7965)	3/1/1998 1:32:00 AM
From: paul ross	Read Replies (2) \| Respond to of 116836

Economics is the most arcane and inexact science, with analysis of the money supply being perhaps the most inexact of the inexact. I can remember in the late 70's receiving what I believe then was a weekly booklet from the St. Louis Fed with the M1, M2, and M3 figures. M3 got as high as about a 15% annualized increase, and then the next booklet I received had been revamped showing only a 9% increase. The only explanation was an asterisk and a "now seasonally adjusted" disclaimer. The figures I based my post on have even been changed since I copied then down in mid Jan., the last M3 figure for 97 I had copied as 5339.9 and is now 5389.8, for 96 copied as 4926.2 now 4949.9, for 95 copied as 4597.5 and now 4599.2. At first I thought I had made my herbal a bit too strong that day, but all the numbers are different. It is also hard to determine just what Greenspan is saying, you need to be able to "translate",as was discussed in the article at: gold-eagle.com Does he feel this phenomenon will continue with the problems in Asia and what effect will it eventually have on domestic inflation. The more rapid growth in M3 starting in 95 without the concomitant rise in inflation (CPI), may be one of the things troubling the FED and why they maintained a tightening bias up until the real onslaught of the Asian problem. Ultimately what is important is to be able to use the numbers to look into the future, will there be inflation which will have a profound effect on all our assets. To protect ourselves, we will want to be out of stocks and bonds and into tangible assets, precious metals, and real estate (with low fixed rate loans). Following the money supply has always been a key in the past,an increase in M3 has always filtered down into M2 and then M1 (until it was "swept" into M2) and ultimately CPI. Using Milton Friedman's model that CPI should equal increase in money supply minus increase in gross domestic product, M2 might be the aggregate most representative of what is the money supply, and ultimately what should be monitored for clues to the advent of inflation. The 1997 M2 of 5.5 minus GDP of 3.8 gives an estimate of 1.7 for the CPI vs. the 2.25 "actual" number. PR