David Merkel (RealMoney):

"If you're not into monetary policy, you can skip this. Within the month, the Federal Reserve will stop publishing M3. Now, I think M3 is quite useful as a gauge of how much banks are levering themselves up in terms of credit creation, versus the Fed expanding its monetary base. I have good news for those anticipating withdrawal symptoms when M3 goes away: The Federal Reserve's H.8 report contains a series (line 16 on page 2 - NSA) for total assets of all of the banks in the US. The correlation between that and M3 is higher than 95%, and the relative percentage moves are very similar. And, from a theoretical standpoint, it measures the same thing, except that it is an asset measure, and that M3 incorporated repos and eurodollars, which I think are off the balance sheet for accounting purposes, but should be considered for economic purposes. But it's a good substitute... unless Rep. Ron Paul's bill to require the calculation of M3 passes, this series will do."

So let's report this number here every week, after 4:30pm on Thursdays.

I think that could be important and I'll tell you why.

First I am going to assume you understand that aggregate money supply is a driver of inflation or disinflation, just like the Fed bank rate is a driver. Clearly, the Fed has more tools at hand in tightening or loosening credit than simple interest rate policy. They buy and sell securities to and from banks, which, based on the multiplier effect, determines how much capital resources a bank can lend or put into the market.

So if the Fed wanted the bond market or the equity market to move up, they would buy Treasury securities from the commercial banks and give them cash to put into stocks and bonds. That's a whole different animal than setting an overnight bank borrowing rate for Fed money.

So M3 was a measure of this, and Bernanke took this measure away from us. The fact he told Congress and hence the American public he'd be more transparent, not less, did not go unnoticed. Some people now are calling him a flat-out liar, but let's not get into names-calling.

We have to deal with the game that the Administration calls a level playing field even when we know that is a complete and utter joke too. So, let's just calculate the best M3 substitute we can, and get on with trading.

Now, here is why I am concerned. We all know Ben Bernanke is a brilliant man. I think he thinks he's smarter than we are.

I think he thinks he can fool us by stopping the usual six-week raise in the Fed rate, and telling us that he's accommodating economic expansion.

In fact, what I am saying is that if he lied to us once, he's capable of doing it again.

No, what I am saying is that he did lie to us once, and he's going to again " sometime in the next couple months. I think his FOMC is definitely going stop raising rates after the next meeting. BUT; MAJOR BUT. I think he's going to put his James Bond trader Dino Kos to work sopping up commercial bank reserves, in hopes we cannot tell this because we lack the M3 data.

Then I think Ben's going to tell us that rates are skyrocketing at the long end, which is the commercial bank problem, not his, because (in his words) the Fed needs to stabilize the $USD, kill inflation, kill high oil and metals prices, and whatever else is on the evil domestic axis.

I even think the President called Larry Kudlow and friends to the White House a week ago to read the riot act on this, and I think Kudlow is primed to tell us that a rising slope to the yield curve is "Good for America. Good for capitalism. Good for ; (whatever else his mantra includes). "

You see, Bernanke has a problem with these people. He doesn't want to lie. His mother would never forgive him. But he has to work with a Congress and a President that lie to him. They keep on saying, "No more war; no more budget deficits; no more pork; no mas".

Circumstance always changes fact into fiction. How about the English, who during wars of centuries back would call the English sea pirates "privateers" and then when the wars were over call them what they always were, which is pirates.

So Bernanke can try to call this next move whatever he wants. The rhetoric will amount to the same. He wants to break the balls of anybody holding metals or oil, and, in doing so, hope to heck he doesn't put millions of American homeowners out on the street.

I wonder if he thinks he's so intellectual he's got that one figured out.