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To: christine thurley who wrote (14651)	7/18/1998 9:46:00 PM
From: long-gone	Respond to of 116764

Welcome Christine: Glad you are here. Even more glad to see others are concerned about the whole world being awash in paper currency: Here is a link which defines M1, M2, & M3 great site I have it book marked ecolan.sbs.ohio-state.edu rh

To: christine thurley who wrote (14651)	7/20/1998 6:33:00 PM
From: goldsnow	Respond to of 116764

Humphrey-Hawkins may hint of rare "M" band dissent By Isabelle Clary NEW YORK, July 20 (Reuters) - Federal Reserve Chairman Alan Greenspan may indicate in his Congressional testimony this week that monetarists at the Fed are moving their fight to an almost forgotten battleground, the U.S. money aggregate bands, Fed watchers said. ''Greenspan may give an indication that some policymakers want a tougher stand against future inflation and are concerned about the recent acceleration in money growth,'' said David Resler, managing director at Nomura Securities International. The Fed chairman is due to testify on the economy and monetary policy before the Senate and House banking committees on Tuesday and Wednesday, respectively. ''Greenspan is testifying for the entire committee and must indicate what the range of opinions is, including for the aggregates' targets,'' Resler added. ''He must incorporate comments that other FOMC members suggest.'' The FOMC votes eight times a year on the federal funds rate, but votes only twice a year on the money aggregates' band. The target band for M2 growth, the main U.S. monetary aggregate, has been 1.0 to 5.0 percent since 1993. Resler said the two Federal Open Market Committee (FOMC) members who dissented for tighter monetary policy in May -- St. Louis Fed President William Poole and Cleveland Fed President Jerry Jordan -- may have dissented again at the June 30-July 1 meeting in favor of a lower M2 target that would be consistent with their hawkish anti-inflation stance. ''I can't answer that question because the minutes of the June 30-July 1 meeting have not been released yet,'' St. Louis Fed's Poole told Reuters last week in an interview when asked whether the current 1- to 5-percent band for M2 was consistent with the Fed's price stability goal. Jordan had already dissented in favor of a lower M2 range in 1992, saying it was important for the ''credibility of (the Fed's) anti-inflation policy to continue the practice of gradually reducing the M2 range.'' During the wild inflationary swings of the late 1970s and 1980s, choosing the M2 band was an important issue for monetary policy and resulted in numerous FOMC dissenting votes. Between 1977 and 1991, FOMC members cast 45 dissenting votes on the aggregates' ranges. Since 1991, however, there has been only six dissenting votes on the issue as the aggregates were perceived as poor gauges of future growth or inflation. M2 has been growing very rapidly -- clearly above its band since the spring of last year -- but the Fed kept the federal funds rate at 5.50 percent amid evidence of subdued inflation and skepticism about the aggregates' reliability as harbinger of inflation. Neal Soss, chief U.S. economist at Credit Suisse First Boston, said policymakers with monetarist views like Jordan and Poole continue to regard rapid money growth as a harbinger of inflation and want the Fed to take a firmer stand on the aggregates. Soss cautioned that monetarist views cannot be dismissed altogether, noting ''These people sincerely believe (money) velocity is stable enough and the Fed should depend on it more. I don't think the rest of the FOMC shares that view at this juncture,'' he added. ''The economy has been venturing into uncharted territory as never before have we experienced such a combination of rapid growth and low inflation. An awful lot of old rule of thumb of economic life seems to have been altered,'' Soss added. PNC Bank Corp. chief economist Stuart Hoffman said ''maybe five percent is still a reasonable upper band.'' ''Maybe four percent (M2 band) is as high as you want to go, but given the margin of error, five percent is fine,'' Hoffman added. ''If you are not quite sure about the relationship between M2 and the economy, five percent is still not inconsistent with inflation working down to 1.0 percent as measured by the Gross Domestic Product deflator.'' biz.yahoo.com