Tom Puves, BMW NA CEO

[eMINI]

So... George Bush and Tom Purves know something about the new M3 that they won't tell anybody? Why would they do that? :iono: Man, that really makes me angry.:mad:

Sorry, I'll just stick my head back in the sand now and think about cars some more.:wink: Apathy... I'm sure I'll pay for it later...

[Nixon]

Originally Posted by MPower

Explain to me why M3 data would prove so much when M1 and M2 would provide exactly the same information (that you are looking for). The amount of US dollars in circulation is not limited to M3.

There is a major flaw in your understanding of M1, M2, and M3. M1 and M2 cannot provide the same information as M3. The M1 is a subset of M2, which was a subset of M3. In round numbers, M1 represents about 15% of the money supply that comprises the M3 data. M1+M2 represents about 65% of the M3 data.

M1 and M2 can never account for about 35% of the circulation of US dollars. And the last published data showed that the gap between M1+M2 and M3 was growing quickly. Without M3, there is no way to track about a third of US dollars in circulation. This is a seriously large hole. The M3 happens to be the only monetary measure that takes into account a number of large foreign dollar holders, including rp's that comprise of a large part of China's holdings in US dollars. This hole is massive enough that any administration could pump literally truck loads of newly printed money into this hole and nobody would know until way too late.

Please tell me how you can determine anything about the true value of USD when you only have data about 65% of the US dollars in circulation?

Wait.

Strike the 65% figure in the last part of that sentence.

We don't even know if M1+M2 represents 65% of M3 anymore. We would have to know what M3 was in order to know what percentage of M3 is represented by M1+M2. M1+M2 could be just 50% of M3 by now, and there would be absolutely no way for you and I to know. M1+M2 could only represent 50% of the total amount of USD in circulation, and only Bush, the Treasury, and the Fed Bank would know it.

Think of it this way. Let's say you were getting a divorce, and your spouse had money socked away in 3 different accounts. You decide you will split the money in the accounts 50/50. But your spouse is only willing to show you the balance in 2 out of 3 of the accounts. Wouldn't you demand to know what was in the last account, or would you just trust that your spouse will give you your half? I wouldn't. I would demand full disclosure. That last account could hold much more money than anyone expected. In the same way, the accounts represented in the M3 data that are not in the M1+M2 data could hold much more money than anyone expected. The end result of that would be that every dollar represented in M1 and M2 would be worth much less than anyone expected.

What I expect and demand from a President whether (s)he is a Democrat or a Republican is full disclosure and openness in monitary policy. This has been the tradition since the creation of this nation.

Anyone who owns anything valued in USD is now just guessing at the true value of their investments. It doesn't matter if you are talking about a car valued in USD, or a house, stocks, money markets, savings accounts, or whatever. There is now no way for you, or for your financial advisors, to truly know the real value of your holdings because the true value of a dollar cannot be known without knowing M3. Your house, stocks, cars, etc, may currently be worth much less than you believe. This is the direct result of Bush's monitary policy, and nobody else but Bush is responsible for this. Not Congress, and not any possible future Democratic administration.



I pity the poor folks in the future who do a search looking for information on BMW M1, M2, or M3 and ends up reading about Bush monitary policy in this thread instead... heh.

[Big Red One]

Originally Posted by Nixon

There is now no way for you, or for your financial advisors, to truly know the real value of your holdings because the true value of a dollar cannot be known without knowing M3.

Makes sense.

So how are foreign companies making decisions about how to price their products if they don't know the real value of the dollar vis-a-vis their currency? And why do the companies that manage my investments continue to allow me to buy/sell in and out of my various mutual funds if none of us really know the true value of any of those holdings? Is there a big correction coming down the road when/if the next administration makes the M3 figure available and the real value of all those things you referenced can be calculated?

Sorry for the questions. Just trying to learn.

[Nixon]

Originally Posted by jrsites

So how are foreign companies making decisions about how to price their products if they don't know the real value of the dollar vis-a-vis their currency? And why do the companies that manage my investments continue to allow me to buy/sell in and out of my various mutual funds if none of us really know the true value of any of those holdings? Is there a big correction coming down the road when/if the next administration makes the M3 figure available and the real value of all those things you referenced can be calculated?

There are two camps. One camp is continuing on with business as usual as if the M1 and M2 data were sufficient as MPower suggested. They are trusting that Bush isn't hiding anything in the M3 data that he refuses to release to the public. This is the majority of global financial institutions and businesses, so they keep conducting transactions like normal based upon the free market exchange rates for USD. They are depending 100% upon Bush keeping the M3 in line with historic numbers. They are betting their future completely on blind trust in Bush because the real numbers are being withheld. Much like trusting your ex in a divorce.

The problem is that new Federal Reserve Chairman Ben Bernanke said in a speech in 2003: “"The US government has a technology called a printing press that allows it to produce as many US dollars as it wishes at essentially no cost.”" This is who Bush has in charge of keeping M3 in line with historic numbers. I cannot trust that the same person who said this will keep the M3 numbers in line now that he does not have to disclose them.

The other camp is divesting USD denominated holdings and exchanging into to fully transparent currencies because uncertainty mixed with politics is too much risk for them. China is among this group, they dumped a large amount of dollars specifically because M3 is no longer being released. A host of other nations are also divesting as much as possible. Normal folks like you and I can't do this. No bank is going to loan us Euros for our home mortgage or our car loans. We can't keep our bank accounts in British Pounds and still spend the money at the grocery store. Eventually we have to pay all of our bills in dollars, so we cannot divest. The same for foreign businesses. They have to do business in USD if they want to do business in the United States, so they cannot divest. The only way to divest is to stop doing business in the US.

There WILL be a correction either up or down if/when the M3 figures are released again. We won't know what will happen until that actually happens. Bush won't do it, so he is leaving it as a trap for future administrations. If/when a Democratic administration decides to release M3, and if M3 has grown out of line of expectations, there will be a correction. The size of the correction will depend upon how far M3 gets out of line with expectations. This cannot be predicted. If we are lucky, the correction will be very small and everyone will go on with life as usual. If we aren't lucky, the sky is the limit on what the impact could be. Bush knows that the administration in charge when this happens will be blamed for the correction happening on their watch, not him. It isn't his problem.

Meanwhile, the currency market will become more volatile with the USD floating up and down based upon beliefs and guesses that are based on only partial data, instead of upon facts from the full data. With the stock market and home markets already very volatile this year, more volatility is not what we need.

[PierrePHRWEAUX]

Originally Posted by WolfsburgerMitFries

Spin doctor...of course he's not responsible for the valuation of the Euro, but his economic policy and geopolitical disasters are directly responsible for the decline of the Dollar in relation to the Euro.

It was ironic. Anyway. This situation is also due to the european bank which keep raising the euro every 6 months to avoid inflation, and this is a disaster for european company which loose competitiveness on the world market. So the weak dollar is not that bad for Americans. And at least, American governement is able to play with the $ to help their economy, which is not the case in Europe because of the European Central bank which set the euro without taking much account of governements wishes.

[PierrePHRWEAUX]

1,3434. EUR USD is in an downtrend directed by 1H exponential moving averages. The volatility is high. Bollinger bands are parallel and form the trend. ForexTrend 1H, 4H (Mataf Trend Indicator) is in a bearish configuration. The downtrend should continue to gather momentum.
=> We could take a short position at 1,3440. We will put the stop loss above 1,3470 (-30 pips). The targets are 1,3380 (+60 pips) 1,3300 (+140 pips). Each trade is dangerous, take care and put your stop loss.

[PierrePHRWEAUX]

Naturally aspirated inline 6 are in a downtrend directed by the narrow power band and high demand for power. The target will be TwinTurbo inline 6 or NA V8 because their volatility decreases. We will put the stop loss above 300hp. Each road is dangerous, take care and don't pass over the limit.

[Big Red One]

Okay Nixon, I think I'm still with you.

So M0 is actual physical cash, travelers' checks in people's hands, etc.. M1 is M0 plus the cash in people's bank accounts, physical cash in safes, vaults, etc.. M2 is M1 plus C/Ds less than $100,000. And then M3 is M2 plus C/Ds greater than $100,000.

So if the Federal Reserve (that's the more accurate way of putting it, right? The Fed makes these decisions, not the president, though the president appoints the Fed Chief) is printing extra cash and stashing it in M3 where it can't be measured, that means they have to be stashing it in large, long-term C/Ds. So how is the Fed getting that cash that they print into the economy? It's not like the cash fairly is putting a few thousand extra dollars into people's C/Ds at night.

If the government goes and prints a bunch of extra cash, it can't have an inflationary effect until it's actually in circulation. That's what I'm having a hard time understanding. How are they getting it into the economy, and how are they getting it specifically into the unmeasured M3 portion of the economy?

[Nixon]

jrsites, You've got the right idea about the relationships between M1, M2, and M3, but of course it is much more complex than that. There are many, many more categories of USD funds than just what you listed, but it does build the way you described. M3 includes a number of large institutional and international USD accounts along with many US accounts greater than $100,000. These aren't accounted for in M1 or M2. M1 and M2 tend to measure more consumer-type USD holdings, M3 is mostly a measure of large scale institutional, governmental, and international holdings.

M3 coincidentally happens to be the most convenient place to distribute large amounts of newly printed money. The gov't isn't going to sell/loan/guarantee large sums of money to 300 million US consumers in tiny chunks like the types of accounts that are measured by M1+M2. They are going to do such things as Repurchase Agreements and fund EuroDollar foreign accounts. Cool international and institutional stuff that have nothing to do with the consumer accounts you and I have access to. If you were in charge of the Fed and you wanted to hide the production of more dollars, the accounts measured by the M3 would be where you would want to put it.

The Federal Reserve Board operates with significant independence from the President, but it is part of the executive branch and it has always operated under the direction of the President. If the President tells the Federal Reserve Board to make lowering inflation a top priority over freeing up credit availability, the Board decides how to accomplish this goal. The Fed has always gotten it's direction from the President, and has traditionally been given wide latitude to decide how to make monitary policy decisions to achieve this goal.

I don't know if Bernanke is printing extra cash and making it available to the wide number of M3 accounts or not. That is the problem. There are rumors being thrown around of an extra two trillion being printed, but without the M3 data, there is no way of knowing if that is just conspiracy theory or fact that is being intentionally withheld. Forbes is saying today that the gov't has reported adding 79 billion new dollars into the banking system over the last week. But since we don't get M3 data anymore, we are stuck trying to figure out what the Fed reports mean to the total, and we are stuck wondering if the Fed is reporting everything they are doing. One thing is for sure, the Fed didn't stick those 79 billion dollars into the individual consumer personal accounts that fall under the measure of M1+M2.

Bernanke has been quoted making very bullish statements about printing endless amounts of money, and at the same time he took charge the Fed quit reporting M3 statistics. Meanwhile Bush has been making public statements about intentionally keeping the dollar weak.

All of the dollars do not have to be in active circulation in order to devalue the USD. In fact the majority of dollars is not in active circulation in the sense of being used to buy and sell consumer goods. It is the mear existence of those dollars that puts the depreciative force on the value of every dollar. I think you may be confusing inflation of the dollar with the valuation of the dollar. The two are closely related, but very different. Here are a couple of quick and dirty definitions that are accurate enough for this discussion:

Inflation (or deflation) measures how much consumer goods can be purchased for a dollar. This is directly linked to the dollars in active circulation. Inflation is very much directly connected to dollars in open circulation by consumers.

Valuation is more of a measure of how much foreign currency can be exchanged for a dollar. Few consumers make foreign currency transactions, so this is handled mostly at the institutional and governmental level.

[Big Red One]

Okay. I see the difference between Inflation/Deflation and Valuation. Can't the argument be made that decreased valuation of the dollar is good (since it has a tendency to protect American goods by making competing foreign goods more expensive) as long as it is not accompanied by inflation?

As I said before, I personally wouldn't take that stance, as I think the bloated Big 2.8 need to be left to sink or swim on their own rather than having artificial economic policy band-aids just enable their poor management and keep pushing looming problems into the future. But the political reality is that it would be political suicide for any president to take that stance since making Detroit globally competitive would involve some decisions the UAW would never go along with. The UAW would stand firmly in favor of the devaluation of the dollar, no? And if that is true, I can't see the next president, no matter what party they be from, changing the current policy of pumping money into M3.

[Nixon]

Originally Posted by Big Red One

Can't the argument be made that decreased valuation of the dollar is good (since it has a tendency to protect American goods by making competing foreign goods more expensive) as long as it is not accompanied by inflation?

Yes, a low, stable inflation rate is better than a high rate, especially when the dollar's value is dropping.

The word "good" when used in macro-economics has to be followed by the phrase "for whom?" There is always a trade-off because company profits come out of consumers' pockets. Devaluation is good for US manufactures the same way that a heavy tariff on imports is good for US manufacturers. They are both forms of protectionism. Companies who manufacture goods benefit from protectionist practices at the expense of all the people who purchase the same goods.

If you love driving hot German BMW's, and you like to keep your tank full of imported gas without draining you wallet, this is not "good" for you personally. The more imported items you buy, and the more foreign travel you do, the worse this is for you personally. (yet another reason why I would like to own a 123d, so I can run it on 100% US-made biodiesel)

One could also argue that the recent increases in energy costs may have done more to damage ALL US corporations than the drop in the dollar's value has benefited the US manufacturing sector, so there has been a net harm to the economy in recent years. One of the confounding issues is that foreign companies made such massive profits on their US sales throughout the 1990's that they have been able to cut their profit margin to make up for the differential and STILL deny US companies a larger market share.

Protectionism doesn't work unless people actually change their buying habits. That hasn't happened on a large scale. Devaluation of the dollar can't have any positive affect unless the theoretical increases in sales of US products actually materialize. If these sales don't materialize, devaluation has mostly negative affects. If you look at the automotive sector, Toyota has still been growing in market share despite the dollar because of market demands such as the demand for cars with increased fuel economy, and a move away from SUV's, that override the affect of the weaker dollar. This overrides the benefit of dollar devaluation -- effectively nullifying much of the "good" that could have come out of a weaker dollar in the automotive sector. The big 2.8 have stopped bleeding losses by cutting expenses such as labor, not by increasing market share. Cutting labor expenses keeps the benefits of a lower dollar from trickling down into the rest of the economy.

Another confounding issue is that the US economy has been increasingly tied into the success of the global economy. Protectionist practices that help the US at the expense of the global economy can backfire when things like a steep decline in the Asian stock markets triggers a drop in the US stock market.

Even the economic theorists would disagree with each other about the "good" that can come out of protectionist practices. One camp says that all protectionism is a negative macro-economic force that brings down everyone in a certain degree. They claim free trade benefits everyone, so the greatest "good" comes when protectionist practices are abolished. Monitary policies that devalue the dollar would fall under that.

The other camp says that protectionist practices are so beneficial to the country practicing them that the "good" out-weighs the damage done to the global market as a whole. They contend that the way to maintain advantage is to use market strength to negotiate protectionist policies that benefit us the most. As long as we keep protecting our markets from their goods better than everyone else protects their markets from our goods, we win no matter how much damage it causes to the global market as a whole.

The part of this that is not "good" is the hiding of the M3 numbers. No matter what the actual monitary policy is, hiding the numbers adds uncertainty to the economics. Uncertainty breeds volatility. Uncertainty and volatility are always negative forces in macro-economics.

[menotakoala]

I thought that the chairman of the Fed was in charge of how much money was being printed. I say stop printing money, put us back on gold standard, and raise interest rates. Isn't one of the main reason why the Euro is so strong is because it is backed by gold? Or was that the British Pound?

[inTgr8r]

LOL.... I thought this was a car forum. :tongue:
You guys need to get a room. :wink:

[Powerman]

This may be a car forum, but right now we don't have the car and are bored:smile:

I would really like a answer to this question.

I thought that the chairman of the Fed was in charge of how much money was being printed. I say stop printing money, put us back on gold standard, and raise interest rates. Isn't one of the main reason why the Euro is so strong is because it is backed by gold? Or was that the British Pound?

The idea continues to float around, but many do not like it (Gold standard and the FED)

[ducati]

I find this discussion quite interesting!

[bimmernotbeamer]

Originally Posted by ducati

I find this discussion quite interesting!

Same here!

[S4 Driver]

Nice post Nixon. I actually learned something from that, which is rare for a forum post. Damn Bush making my 135i more expensive!

[theslik1]

I'm sure I'll find this discussion interesting when I have time to read it.

[Nixon]

Originally Posted by menotakoala

I thought that the chairman of the Fed was in charge of how much money was being printed. I say stop printing money, put us back on gold standard, and raise interest rates. Isn't one of the main reason why the Euro is so strong is because it is backed by gold? Or was that the British Pound?

Bernanke has a boss that can tell him what to do named George Bush. If Bernanke doesn't do what Bush tells him to do, Bush can have him removed. Luckily for Bernanke, he is a longtime personal friend of Bush, so he doesn't have any problem taking his orders from the White House. The Fed does NOT operate outside of the government as a rogue entity that answers to no one.

Going off the gold standard is like losing your virginity. There is no going back once the deed has been done. You can't unprint dollars, short of a massive currency exchange. Once a dollar, or Euro, or Ruble is printed and put into circulation, it is in circulation forever unless all of the currency is exchanged for a new re-valued currency. And there are over 30 years worth of dollars that aren't backed by gold that would all have to be dealt with in order to return to a gold standard.

Russia has been forced to exchange all of their currency seven times in order to re-value the Ruble. It was never a pretty process, and the chaos is an economic disaster. The process is to establish a conversion rate between the "old" currency and then give people a few weeks or a few months to bring in all of their currency to have it converted to the "new" currency. The old currency then becomes worthless. We've never done that in the US. Just last week a relative of mine showed me a 5 dollar bill that my great-great grandfather signed into circulation in the late 1800's in Denison Iowa (back when regional banks put bills into circulation.) If I took it to a bank, they would hand me a crisp new 5 dollar bill and take it out of circulation, but it is still worth 5 dollars. (Of course collectors will pay more than face value.) Compare that to 15 year old Rubles that are worth nothing at any bank. That is what would happen to the old USD notes in an exchange.

Each of these exchanges in Russia were very damaging, but they could get away with it because the Ruble wasn't a convertable currency anyways. This would be much more painful for the USD, because it is a major international reserve currency. A currency exchange to re-value the dollar to a gold standard just isn't going to happen short of a complete collapse of the dollar. If the dollar completely collapsed, going back to the gold standard and replacing all of our current dollars with "new" gold-dollars would be a good method for disaster recovery. That is the only situation I can see it ever happening.

This just underscores how important it is for there to be transparency in the monitary policy. Once mistakes are made, they are very, very painful to fix.

[Powerman]

Originally Posted by Nixon

This just underscores how important it is for there to be transparency in the monitary policy. Once mistakes are made, they are very, very painful to fix.

So we can't/won't go back to a gold-dollar. I read the link you posted about Bush ordering $2 trillion to be printed. When I looked for more info on it, one place pulled the story because they could find no evidence.

Let's don't even harp on Bush. We don't have enough time for that:smile: How much control does the President have over the FED? Congress claims they have no oversight, and Bush has a friend that heads it, and M3 numbers are no longer important. Is that just conspiracy theory, or is it something to worry about? There has to be other checks and balances to prevent a President sand bagging the next administration by telling the FED what to do.

[Nixon]

Originally Posted by Powerman

I read the link you posted about Bush ordering $2 trillion to be printed. When I looked for more info on it, one place pulled the story because they could find no evidence.

My point of posting that link was to show that without M3 data, nobody can discuss the true amount of dollars being pumped into circulation without sounding like a conspiracy theorist. Bush is directly responsible for creating this situation. I could tell you if they were right about the $2 trillion dollars if I had the M3 data.

Originally Posted by Powerman

M3 numbers are no longer important.

Bernanke says that the M3 numbers (that are the only way to account for around 35% of all USD in circulation) are no longer important because M3 data did not accurately predict the last 6 recessions. Bernanke is factually correct that the M3 is not a leading indicator of recession, but that fact is a red herring. Anyone is free to choose to accept their spin that the M3 is completely useless just because it cannot predict recessions, and that it has no other use. I do not accept that.

Anyone who is satisfied not knowing what is going on with about a third of the USD in circulation just because Bernanke states the obvious that the M3 is not a leading indicator of recession, really must not care about the total amount of USD in circulation.

Originally Posted by Powerman

Is that just conspiracy theory, or is it something to worry about?

The answer is nobody knows, and the reason why nobody knows is because Bush is withholding the critical information needed to answer that question.

It is not conspiracy theory that the M3 data is being withheld from us. That is fact.

It is not conspiracy theory that we now only have data on somewhere around 65% of the dollars in circulation. That is a fact.

It is not conspiracy theory that the Feds now have the ability to print trillions of new dollars and distribute it into accounts that would only be measured by M3, and none of us would know about it. They really do have that power now, it's a fact.

Bush supporters can't prove one way or another if Bush is printing $2 Trillion new dollars, because Bush is withholding the M3 data that his supporters would need to prove it.

I look at it this way: If any question even comes up as to whether Bush is printing trillions of new dollars in secret, and the only way to definitively answer the question is to look at the M3 data, I say Bush better give us those numbers. There shouldn't be a hole in the accounting books that would even allow such questions to come up. We should all be able to point to the numbers and say either yes an extra $2 trillion is being printed, or no there is not an extra $2 trillion being printed.

Originally Posted by Powerman

There has to be other checks and balances to prevent a President sand bagging the next administration by telling the FED what to do.

All checks and balances depend upon free and open information to work. No system of checks and balances works when those in charge of imposing the checks and balances are not allowed access to the facts. It is my personal opinion that the Bush administration has not, in general, provided the quality and volume of information needed to allow any system of checks and balances to work.

[Nixon]

I think I'm getting to the point where I'm out of new information that I can add on this topic. Unless someone posts an interesting new twist on the topic, I think I'm going to pronounce this thread to be officially dead....

Any objections?