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Support Rep. Ron Paul's Bill to Force Fed to Keep Publishing M3

In a tragically under reported story, new Federal Reserve Chairman Bernanke declared that the Fed would no longer publish M3, the index that shows total U.S. dollars in circulation. By doing so, the Fed has eliminated transparency into the total money supply being printed. Representative Ron Paul has introduced legislation to force the Fed to keep publishing M3. Call your Congressional Representative and demand that he/she support this legislation.
To better understand the significance of the Fed's decision to discontinue publication of M3 (Money Supply 3), it is first important to understand the Money Supply indicators. M1 is all hard cash and coin in circulation, plus checking account deposits. Developed prior to the financial innovation of money market accounts, it was a historical index of liquidity in the market. M2 includes M1 plus CD's and money market accounts (under $100K), and is a better contemporary index of market liquidity over the last 25 years, since one no longer needs to wait until a bank opens at 8 am on a weekday to get to their funds. M3 is M2 plus the total institutional funds (in excess of $100K) and holdings of dollars by foreign governments.

Economists and financial analysts have been highly critical of the Fed's decision to end M3, because it will essentially end visibility to the total number of dollars being printed. Bernanke claims that the costs of collecting data on M3 is too expensive and that the index itself is not that useful. Essentially, Bernanke is saying that the Fed wants to be able to print as much money as it wants without anybody knowing how much is out there. That this change in methodology is occuring at a time in which the Republican controlled government continues to raise the national debt ceiling and pass on tax cuts to the rich is surely an interesting coincidence. Foreign governments holding US dollar reserves now have no certain way to tell how much that currency is actually worth and nor do US citizens!

There's an old saying that goes the President picks his cabinet, but Wall Street picks the chairmen of the Federal Reserve Bank. With that in mind it is truly interesting that since 2004, U.S. banks have decreased their holdings of the U.S. national debt from about 9% down to about 1.5% today, despite booming profits from the Bush Administration's supply-side fiscal policies.

It is completely outrageous for the Fed to make such a sweeping change in methodology unilaterally. Furthermore, it is one more instance of elements of government that are supposed to be independent and objective in their administration, like the Supreme Court, adopting policies that are blatantly partisan.

I urge all citizens, Republican and Democrat alike, to contact their elected officials and demand that they support Ron Paul's (R - Texas) legislation to force the Federal Reserve Board to continue to publish M3.


February 15, 2006

Washington, DC: Congressman Ron Paul of Texas today questioned new Federal Reserve Chairman Ben Bernanke before the House Financial Services committee. Paul continued his longtime criticism of Fed policies, focusing on whether the relentless increase in the money supply that took place during Alan Greenspan's tenure will continue.

Mr. Bernanke has pledged to bring increased transparency to Federal Reserve policymaking, but the recent Fed decision to discontinue compiling and releasing the M3 monetary aggregate figure casts doubt on this promise. M3 is widely used by economists, policy makers, and investors as the most accurate and reliable true measure of the money supply.

Paul, known as a congressional expert on monetary policy, reminded Mr. Bernanke that inflation is always a monetary phenomenon, resulting from an increase in the money supply as ordered by the Fed itself. M3 has risen more than twice as fast as M2 and GDP in recent years, illustrating that real inflation is much higher than the government admits through its CPI statistics. The troubling possibility is that the Fed discontinued M3 for the simple reason that it wants to conceal the extent to which the money supply- and hence price inflation- really grows.

Paul is preparing legislation that will compel the Fed to continue publishing M3, and plans to introduce the bill in the Financial Services committee later this month.
IF . . . 01.May.2006 16:32


if Democrats were mostly like Dennis Kucinich and Republicans were mostly like Ron Paul

. . . hmmmmmm