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Investor quandary: Buy gold or gold mining stocks?
M3 Mutterers Refuse to Give Thanks
By Peter Brimelow
CBSMarketWatch.com
Friday, November 25, 2005
http://www.marketwatch.com/news/story.asp?guid=%7B45AB8ED5%2DDF4E%
2D4B92%2D8CCA%2DC34D1EEDBC67%7D&siteid=mktw&dist=
NEW YORK -- The stock market reaches for multi-year highs -- but so
does gold. Is that a warning sign?
Last Friday I wrote last about the astonishing lack of comment
outside of investment letters and the financial blogosphere about
the Federal Reserve's curiously discreet announcement that it
intended to stop publishing data on the broadest monetary aggregate,
known as M3.
One journalist who often serves as an intermediary between these
investment irregulars and the establishment media is the New York
Post's John Crudele. On Nov. 22 he published a succinct statement of
their grievances.
Crudele noted that Fed Chairman-presumptive Ben Bernanke has already
shocked observers by threatening unrestrained money creation. He
concluded:
"Where would that shocking breach of monetary policy show up? In the
M3 figures that are being discontinued, of course. ... So if Ben
Bernanke did convince the Treasury to print money and drop it from
the sky, the elimination of M3 might allow the move to go
unnoticed. ... Great timing, guys"
Additionally, the widely respected Bloomberg columnist Caroline Baum
was mobilized to see off any bother about the M3 question.
Baum has an iconoclastic manner but she usually comes down on the
side of Wall Street orthodoxy. A recent example was her Oct. 24
column sneering at the Sprott Asset Management paper documenting the
evidence that a "Plunge Protection Team" exists to support the stock
market at crucial moments.
Her argument essentially was that none of her friends admit it
exists, so it can't.
Baum's Nov. 22 column on the M3 controversy did acknowledge a
peculiar lack of consultation. She quoted Maurine Haver, president
of Haver Analytics and chairwoman of the National Association of
Business Economics statistics committee as saying, "It doesn't seem
they reached out very far to get user feedback on the
discontinuation of the series."
Baum did cite a huge saving arising from discontinuation:
"In the M3 review, the board staff determined the elimination would
save roughly $500,000 a year for the board and Reserve banks and $1
million a year for depository institutions, according to a Fed board
spokesperson."
Phooey.
And she implied that M3 can't matter because the filthy French et
al. think it does:
"The European Central Bank has made monetary analysis one of
its 'two pillars' and M3 its preferred stone."
Baum also specifically attacked one Internet irregular:
"On Safehaven.com, where fantasy and reality mix, contributor Robert
McHugh offered up the answer to why the Fed is discontinuing the
weekly report of M3. 'Why? It's simple, really,' wrote McHugh, a
regular contributor to the site. 'So that the Plunge Protection Team
can hide its market manipulative, equity buying activities.'"
See McHugh's essay:
http://www.safehaven.com/showarticle.cfm?id=4108
Hmmm again.
In science, you measure things first and develop theories afterward.
That is why people liked having M3 around. There is work in hand
using M3 -- case in point, perhaps uncomfortably so: Mike Bolser's
Interventional Analysis, which is developing a thesis about
systematic official intervention in financial asset markets, using
M3-related data:
http://www.interventionalanalysis.com/
If you are not so complacent about the authorities, you might be
like a remarkable Robert Lumen essay about the new Fed head's
inflationary implications on LewRockwell.com: "Bernankeism: Fraud or
Menace?":
http://www.lewrockwell.com/blumen/blumen10.html
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