Market Observations with Rob Kirby

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Show Me the Money

by Rob Kirby, Kirby Analytics. November 14, 2005

This past week saw the Federal Reserve announce that they intend to discontinue publishing weekly M3 money supply aggregate statistics. Additionally,

The Board will also cease publishing the following components: large-denomination time deposits, repurchase agreements (RPs), and Eurodollars.

In a November 10 Bloomberg article by Vincent Del Giudice and Craig Torres, an "unnamed" Fed spokesperson we alleged to have said,

"M3 does not appear to convey any additional information about economic activity that is not already embodied in M2," a Federal Reserve spokesman said. "The role of M3 in the policy process has diminished greatly over time. Consequently, the costs of collecting the data and publishing M3 now appear to outweigh the benefits."

Apparently, the Fed would have us believe that they are now worried about the costs associated with reporting M3 money supply data.

Just for fun, here's what the ECB [European Central Bank] had to say about M3, coincidentally, just this past week:

EUROPEAN Central Bank council member Nicholas Garganas said money supply growth is a "serious risk" to inflation and may tip the bank toward its first increase in interest rates in five years.

"There is no question that the recent acceleration of M3 growth poses some serious risks to long-term inflation," Garganas said in an interview late Sunday in Basel, Switzerland.

Perhaps the ECB people should speak with the folks at the Fed, ehh?

Pictures Worth Thousands of Words

Just to round things out where M3 money supply is concerned, I felt it would be fitting to stop by my friend Jesse's web site to see what might be playing there:

What these charts show is just how money supply [M3] is utilized by the Fed "buoy the stock market" when confronted with adverse readings or downturns in consumer sentiment. Maybe we really would be better off not knowing about such things after all – because at the end of the day - we all know the health of the stock market is paramount and an issue of national security - now isn't it?

Today's Market

North American markets began the week with the DOW up 11 to 10,697, the NASDAQ down 1 ½ points closing at 2200 and the S&P down 1 point, closing at 1234.Interest rates were little changed with the 10-year bond ending the day at 4.61% and the 5-year bond at 4.55%.

Wishing everyone a pleasant evening and profitable tomorrow!

Rob Kirby

© 2005 Rob Kirby

Contact Information

Rob Kirby | Proprietor, Kirby Analytics Newsletter - Proprietary Macroeconomic Research
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