Does M3 Matter?
Donald Luskin, CNBC commentator and chief investment officer of Trend Macrolytics LLC, writes:
If I’m right and Ron Paul doesn’t just fade away as the primary season progresses, he’ll make a real difference. His anti-war message would make life difficult for Hillary Clinton, by drawing away the most pacifist elements of the Democratic base. But it’s on the economics side where I think he could make the biggest impact. In an election year in which bigger government, higher taxes, and protectionism seem to have so much momentum, Paulonomics may be just what is needed to rebalance the debate in favor of growth.
Yet he dismisses Dr. Paul’s criticism of The Fed’s discontinuance of M3 as ‘nutty’. Mr. Luskin manages to weave ‘radical’, ‘gadfly’, ‘flamboyant’, ‘nutty’, and ‘Kucinich’ all into feints of aspersions, but backs away from each carefully. Is this now the price of admission for a nationally syndicated article?
I found an old interview with Paul discussing his criticisms of M3’s discontinuance before he was running for anything other than district Congressman. One may find grounds to argue with his relative valuation of M3, but he clearly explains his thinking, and if M2 and M3 move independently, it would be interesting to hear a reasoned explanation for how it’s not useful or how the same information can be derived from M2. As I understand it, the only explanation offered is that it’s ‘not useful’ and ‘costs money to calculate’. The latter case is obvious, the former needs justification.
If anything The Fed should have realized that perceptions are important and provided good data to back their claims, since others are claiming that their intentions are skulduggerous.