Peter Brimelow: Gold enters new phase


By Harlan Levy
Journal Inquirer, Manchester, Conn.
Wednesday, November 30, 2005

In a little-noticed decision a few weeks ago, the Federal Reserve
Board said it would stop publishing its weekly M3 money supply number
as of next March, although it will continue to publish M0, M1, and M2.

M0is all coins and paper bills. M1 is M0 plus all checking accounts.
M2 is M1 plus savings accounts, money market accounts, and
certificates of deposit of less than $100,000. M3 is M2 plus all
deposits, euro dollars, and repurchase agreements that are $100,000
and larger.

(A repurchase agreement is a short-term sale and subsequent
repurchase of securities by a bank or other financial institution.)

M3 is the broadest measure of how much money is circulating in the
U.S. at any one time. Unlike M2, M3 is the big stuff, the super-size

"M3 shows intervention and big money movements," Bill King says in
The King Report says.

But why should you care?

Actually a lot of you should -- those who own stocks, and that
amounts to about half of all U.S. households.

Now back to M3: I asked the Federal Reserve Board why it will stop
publishing M3.

"Our searching of the economic literature revealed that very few
economists used that aggregate," the Fed responded, adding that "M3
does not appear to convey any additional information about economic
activity that is not already embodied in the M2 aggregate. Further,
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."

Some financial analysts disagree violently.

"They know what's coming -- massive amounts of dollar creation to
fund the worsening trade and federal government budget deficits,"
says James Turk in the Free Market Gold & Money Report.

"There is only one reason for the Fed to conceal important monetary
component information," The King Report says. It's "to cover up the
truth about what the Fed, central banks, and the really big money are

The Fed, central banks, and other groups are informally known as
the "Plunge Protection Team."

The reason the Fed will stop publishing weekly M3 totals, says
financial analyst Robert McHugh Jr., is "so that the Plunge
Protection Team can hide its market manipulative equity-buying

The PPT is poised to buy stocks and do it secretly, McHugh says, "to
stop the higher-than-normal probability that the market could crash."

McHugh surmised this in October, "because of the M3 numbers. We could
see there was too much money being created. ... M3 was being pumped
at three times the rate of growth" of the Gross Domestic Product.

Unlike M2, M3 includes items that are the most obvious signs of PPT
market-buying transactions, McHugh says. "If they no longer report
this item, folks like us who monitor the growth of M3 for clues as to
when the PPT is likely to buy the market will have a harder time
reporting that fact. Investors will be left more in the dark as to
any secret rigging of the stock market."

A possible market crash is only one reason for secrecy, McHugh
postulates. "Is the economy closer to the brink than anyone realizes?
Or is it politically expedient to goose markets? Do the corporate
elitists want the big payback for backing the powers that be and
insist upon a rising market into year-end?" he asks. "Do they see a
catastrophe coming that will require hyperinflation to bail the U.S.
out? Maybe."

But the "master planners" do not believe in the forthright flow of
information, McHugh says. "They believe that bad news cannot be
handled by the flock, that confidence must be boosted at all costs,
even if it entails manipulating the markets."

As the King Report puts it, "Am I suggesting there might be something
of a nefarious nature going on here? I certainly am."

Making large stock purchases secretly, McHugh explains, can be enough
to spark a rally, and when the buying gets heavy, the PPT can get out
at a nice profit before the market resumes a slide, along with "their
Wall Street friends who took the risk and bought with them early,"
leaving many investors high and dry.

It doesn't take much to realize that if investors like you and me
don't know the reality of what's happening in the market and the
economy because of deception, we can make some very bad decisions.

The Fed, in its response, did not answer my question asking if the
analysts' suspicions were true.

But that doesn't mean we as citizens cannot ask those in Congress to
find out the reason for the Fed's move. If it is suspicious, maybe
it's possible to stop it. At least we should get a full answer.


Harlan Levy is a Journal Inquirer staff writer.


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