<div> </div> <div>I think what M3 might well measure is the narrow availability of credit-money. There's no reason to think that this cannot be somewhat independent of economic growth or inflation. I'd say the 2002-2003 numbers clearly reflect the Fed's turning on the liquidity firehose in an attempt to knock the stock market out of the anti-bubble it was in (or at least another phase of the anti-bubble). See: </div> <div><font color="#800080"></font> </div> <div><font color="#800080">    </font><a href="http://www.ess.ucla.edu/faculty/sornette/prediction/index.asp#prediction">http://www.ess.ucla.edu/faculty/sornette/prediction/index.asp#prediction</a><br> </div> <div>I think there has certainly been asset inflation, taking real estate into account. </div> <div> </div> <div>As you know from previous discussions, I think the economy is a probabilistic thing and nobody should expect one thing to deterministically increase when another increases.<br>If you do the things the Fed did in the early 2000s, you expect that the amount of deposits and liquid, short-term assets will LIKELY increase and that increase will LIKELY reduce the marginal propensity of the people who have that money to panic and sell and increase their marginal propensity to take courage and buy. Of course excessive monetary growth with reduced marginal gain in economic activity is dangerous and courts currency disaster. </div> <div> </div> <div>Again, as the M3 increases get big, I think it's entirely expected that the supply-side Fed would start to de-emphasize it. </div> <div> </div> <div>peace</div> <div> </div> <div>boddi</div> <div> </div> <div><span class="gmail_quote">On 11/16/05, <b class="gmail_sendername">Doug Henwood</b> <<a href="mailto:dhenwood@panix.com">dhenwood@panix.com</a>> wrote:</span> <blockquote class="gmail_quote" style="PADDING-LEFT: 1ex; MARGIN: 0px 0px 0px 0.8ex; BORDER-LEFT: #ccc 1px solid">boddi satva wrote:<br><br>>Hang on, why is M3 useless? The Bank of England publishes an M4 and<br>>M5 don't they? Isn't it a little suspicious that after increasing <br>>the money supply so copiously the Greenspan Fed conveniently retires<br>>the broadest measure of money?<br><br>What's it telling us? An inflationary boom is imminent? For the year<br>ending October, M1 was up 0.5% , M2, 4.0%, and M3, 7.3%. Which should<br>we listen to? All three Ms were up 7-9% in mid-2003 - what did that<br>mean? In early 2002, they were up 8-12% - was an inflation boom<br>imminent? If so, what happened to it? In Oct 2000, M1 was of 0.3% and<br>M3 was up 10.2% - just before the recession began. What did that mean?<br><br>Doug<br>___________________________________<br><a href="http://mailman.lbo-talk.org/mailman/listinfo/lbo-talk">http://mailman.lbo-talk.org/mailman/listinfo/lbo-talk </a><br></blockquote></div><br>