Discontinuance of M3 - From the Federal Reserve.

Release Date: November 10, 2005, revised March 9, 2006

On March 23, 2006, the Board of Governors of the Federal Reserve System will cease publication of the M3 monetary aggregate. The Board will also cease publishing the following components: large-denomination time deposits, repurchase agreements (RPs), and Eurodollars. The Board will continue to publish institutional money market mutual funds as a memorandum item in this release.

Measures of large-denomination time deposits will continue to be published by the Board in the Flow of Funds Accounts (Z.1 release) on a quarterly basis and in the H.8 release on a weekly basis (for commercial banks).

M3 does not appear to convey any additional information about economic activity that is not already embodied in M2 and has not played a role in the monetary policy process for many years. Consequently, the Board judged that the costs of collecting the underlying data and publishing M3 outweigh the benefits.

http://www.federalreserve.gov/releases/h6/discm3.htm

Can anyone help me with what this means?

On edit: This means they will not publish information on "all other CDs, deposits of eurodollars and repurchase agreements."

whether or not monetary policy was effective. My father has worked in the investment industry for 22 years and no economist in the three firms he has worked with ever refered to M3 for determining what was going on with monetary policy.

You want to know how "fast" dollars are circulating to measure inflationary pressures. But with all the new "instruments" the definition of money has expanded.

You could say we're moving forward with one eye deliberately closed - I'm not so sanguine about the change, but if the "market", that is stockbrokers and currency traders, don't complain, there's nothing we can do about it.

they know the dollar is in trouble, the national debt is about to clobber us, etc. And in the usual BushCo fashion, their "solution" is to stop reporting any figures that might tell us what's going on. Because any problem can be solved by ignoring it.

I don't know if that's true, but it's a theory.

reporting - some banker friends of mine say this 'move' does not bode well...

"History has shown that only failing economies e.g. Soviet Union keep data secret (Financial Sense - Toni Straka - Unpleasant M3 Trend, November 12, 2005). An interesting premise and a theme we saw woven amongst a number of writers is that they have something to hide. The claim is that the Fed should be transparent and by not publishing the number the Fed now lacks transparency.

"The end of publishing of M3 in March 2006 coincides with the start of the Iranian Oil Bourse. The premise here is that the with the oil bourse trading in Euros there will be a rush out of US$ into Euros and that M3 could drop sharply. A sharp drop in M3 would of course presage a recession as falling M3 is a characteristic of weak economic periods.

"M3 is a measure of inflation in the economy. A somewhat unproven rule of thumb is GDP + inflation = M3. Will be able to properly measure inflation going forward if we don't know what M3 really is."

http://www.gold-eagle.com/editorials_05/chapmand112205.html

But since Reagan very rarely cited, probably do to the steady inflation of the 1980-1993 period (Inflation was double digits under Carter, but held to a steady 4-5 % throughout Reagan and than Bush I's Terms in Office, only dropping under Clinton).

As to why drop it NOW??? That takes someone with a better knowledge of economics than I have, but I suspect it is to hide an expected large increase in the Money Supply least people who remember the 1970s remember that high Inflation is caused by a High Supply of Dollars.