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M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) traveler's checks of nonbank issuers; (3) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (4) other checkable deposits (OCDs), consisting of negotiable order of withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, credit union share draft accounts, and demand deposits at thrift institutions. Seasonally adjusted M1 is constructed by summing currency, traveler's checks, demand deposits, and OCDs, each seasonally adjusted separately.
M2 consists of M1 plus (1) savings deposits (including money market deposit accounts); (2) small-denomination time deposits (time deposits in amounts of less than $100,000), less individual retirement account (IRA) and Keogh balances at depository institutions; and (3) balances in retail money market mutual funds, less IRA and Keogh balances at money market mutual funds. Seasonally adjusted M2 is constructed by summing savings deposits, small-denomination time deposits, and retail money funds, each seasonally adjusted separately, and adding this result to seasonally adjusted M1.
So you think M3 is valuable as a measure of money supply?
I realize the shortcomings of some of these numbers, and M3 isn't an answer to all the information that we would like. But it's better than not having it. I think it does represent a reflection of Federal Reserve policy. For them to quit reporting it you have to ask, why?
Ok--we'll bite. Why?
I don't know exactly why, but the Fed gives answers. They claim that it costs too much money and they don't use M3 any more. My argument to [Fed Chairman] Bernanke the other day was: some of us like M3, and Congress has a right to this type of information. There are still a few people in the country that think money supply's important, and M3 is a reflection of money supply. I mentioned that there are a few economic schools of thought that are still concerned about M3, although some deny it has any value.
The most interesting thing was when he said it cost too much to collect [the data for compiling M3]. I kid the Fed about that, and say, I don't why you should be concerned about it. If you need to spend money you just print it.
I think this denial of the M3 information is just another effort to direct attention to the Congress, or the Arabs charging too much for oil, or the price of education going up too much, or the cost of medical care rising too fast. The Fed wants to direct your attention away from the real culprit: the creation of money and credit.
What do you think the Fed should be doing these days?
Ultimately, I wouldn't even have a Federal Reserve system, because you don't need one. Even Friedman, with his monetarism, thinks we shouldn't have a Federal Reserve manipulating interest rates.
This bill never became law. This bill was proposed in a previous session of Congress. Sessions of Congress last two years, and at the end of each session all proposed bills and resolutions that haven't passed are cleared from the books. Members often reintroduce bills that did not come up for debate under a new number in the next session.
Inflation can also be described as a decline in the real value of money—a loss of purchasing power in the medium of exchange which is also the monetary unit of account. When the general price level rises, each unit of currency buys fewer goods and services. A chief measure of price inflation is the inflation rate, which is the percentage change in a price index over time.
I asked the same question to Bernanke, and he totally ignored it. I said, M3's growing twice as fast as M2. And the change in the growth is important too. A couple of years ago M3 wasn't growing quite as fast, and in the last eight or nine months it's accelerated.
Originally posted by Shadowflux
I think it's a safe bet to say that if the M3 was still produced it's total would be much higher than the current M2 for this month. I think it's impossible that the Stimulus and Bailout totals would exceed the totals for the M2. I mean, how can we be giving out more money than we actually have?
Originally posted by Shadowflux
It is what it is, as my dad always says. These are the times we live in, we just have to take it a day at a time and remember what is truly valuable in life, those that we love and the time we spend with them.