M-3 and the Tough Question

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27 Ventôse, An 214

On March 23, 2006, the Board of Governors of the Federal Reserve System will cease publication of the M-3 monetary aggregate, which refers specifically to institutional money funds, large time deposits, repurchase agreements, and Eurodollars (see https://www.federalreserve.gov/releases/h6/discm3.htm).
Here's a sliver of what Robert McHugh, Ph.D., of the Financial Sense University has to say (in part--see link for the rest):

"It is official. A recession is coming. How do I know? Because this week new Fed Chairman Ben Bernanke gave an official warning to bankers about commercial real estate loans. That is always the kickoff to a recession. It is the starter’s gun, the national anthem before a ballgame, the opening hymn at a church service. . . .

"What is happening here? How does [ceasing to publish M-3] reconcile with the Bernanke announcement that bank commercial real estate lending will be curtailed?

"There are two ways for the money supply to grow. First is through the bank lending function. The more lending, the more spending, the more bank deposits, which is at the core of the money supply definition. The Fed has apparently decided to slow the velocity of money creation by slowing or shutting down lending. However, the Fed knows it needs money to buy financial markets and monetize our debt. The lending function is too much out of the direct control of the Fed. . . . the Fed wants to decide where money goes. So it will replace money created through the lending function with money created from thin air by the Fed itself. The way for that electronic money to enter the economy will be from the Fed directly buying something, or lending money to someone. In effect, the Master Planners will decide where fresh money goes. They will control more of the spending. But they cannot let us know this. Because it would be too easy to prove they are doing this if M-3 remains transparent. You would simply compare commercial and consumer loan data to the M-3 figures. If we saw debt declining but M-3 rising, voila, we would clearly see the Fed is directly pumping and funneling that money someplace, which would beg the tough question, where?"