Friday, March 24, 2006

M3 Discontinuance

Yesterday the Federal Reserve stoped publishing M3 figures - the best information available on how much new currency is being created and held around the world. Witholding this information from public scrutiny will allow the Federal Reserve to turn up the printing presses to full-blast mode and pump our money supply to massive new heights (without public knowledge). These new dollars (created out of thin air) will eventually cause inflationary pressures--as more dollars enter circulation, each dollar is worth less and prices rise... I hope this makes sense to you.

Anyway, the wrote an interesting article concerning the issue: The Feds New Secret Could Mean Big trouble

The Federal Reserve Bank’s decision to discontinue publishing M3 money totals is an inflationary omen.

The money supply (M3) is such a boring topic that most people don’t bother to pay any attention to it.

In fact, outside of economists, stock and bond investors and bankers, not too many people care about how many U.S. dollars are in the world.

However, a recent decision by the U.S. Federal Reserve regarding the M3 will likely have serious ramifications that none of us will be able to ignore. Here is why.

The United States is a nation of debts and bubbles. U.S. debts, deficits and unfunded promises total in the tens of trillions—USA Today says it is close to $53 trillion for just the future benefits promised under Medicare, Social Security and government pensions. And each year the problem gets worse as the government continues to borrow money to fund current spending.

As the nation sinks further into debt, and as more of the $53 trillion in unfunded promises comes due (the first of it starting in 2008), America will rapidly find it more difficult to pay its bills.

The United States has already proven that it is unwilling to cut services or raise taxes in any meaningful way. Instead America’s leaders have chosen to continue to borrow more money to pay for the standard of services America has become used to. The last time the United States actually paid some of its national debt was in 1960, and even then it was a miniscule amount.

While the debt’s growth has shown no signs of slowing, the housing market’s growth now looks like it has. Several major metropolitan cities across the U.S. now show negative or zero price growth. But the U.S. cannot afford a slowing housing market, let alone a housing bubble bust.

“Cash-out” refinancing, provided by soaring real estate prices, has enabled much of the voracious consumer spending over the past few years. Since consumer spending now accounts for over two thirds of U.S. economic activity, if spending falters, so does the economy.

Furthermore, over the last few years, the housing boom has accounted for about 40 percent of all new American jobs created in the private sector.

So what does M3 have to do with debts and housing bubbles?

In general terms, M3 is the only number the Federal Reserve calculates that shows how many dollars are in the system. By watching this number, economists and investors can determine the growth of money in the financial system.

However, as of March 23, 2006, the Federal Reserve Bank will no longer publish M3 figures.

Why would the Fed do this? The Federal Reserve Bank’s official reason is “that the costs of collecting the underlying data and publishing M3 outweigh the benefits.” However, this explanation sounds questionable because M3 is a number that many economists and financial analysts study, and is also a number that the Bank of Canada, the rest of the G7 nations and many other European countries rely heavily on. As financial analyst David Chapman of Bullion Marketing Services reports, “[O]f the Fed’s monetary numbers only M3 was of major importance …” (, Nov. 10, 2005).

There is, however, a more likely reason for M3 discontinuance: that is, dollar devaluation.

A crisis is coming. America is facing huge debts, and the economy, which has become largely reliant upon the housing bubble, looks increasingly like it is about to pop.

There is only one way the government will be able to keep up with its debt (at least in the short term)—and only one way that the government will be able to get enough money to mop up the housing bubble bust that is coming.

That way is to print the dollars that will be needed.

By no longer publishing the M3 statistics, the Fed can hide how many dollars are being created.

Of course, as more dollars are created beyond demand, they eventually become worthless. By hiding how many dollars are in circulation, it appears the Fed is trying to prolong the dollar’s value.

LEAP/E2020, a European economic think tank, says that “[f]or some months already, M3 has significantly increased (indicating that [money printing] has already speeded up in Washington) ….”

In fact, LEAP/E2020 thinks this is such a huge event that it is one of two factors (the other being the proposed Iranian oil bourse) that will have a negative impact on the U.S. dollar “comparable to the impact of the fall of the Iron Curtain in 1989 on the ‘Soviet Bloc’” (ibid.).

Considering the Federal Reserve Bank’s decision to stop publishing the M3 data, American consumers can expect to see a growing trend of dollars devaluing, savings becoming less valuable, and having to pay hyperinflationary prices for basic needs.

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