Thanks for the post Bill. I believe M3 is a great indicator (combined with other data) of where things are headed as you eloquently point out.

I sort of feel sorry for Bernake because deep down he must realize that gravity will take hold of the M3 situation and take the economy down. Once it does, the midterm elections will be over and the Administration can ride out the final two years with little resistance. Bernake truely appears to be a puppet of the administration.

Greenspan demonstrated a backbone when he felt things starting to run away. I respect him for that.

An interesting list, thanks for the link.
http://www.nowandfutures.com/false_data.html

Here's a puzzle.

If you believe John Hussman the fed is almost entirely irrelevant. The argument is here:

http://www.hussmanfunds.com/html/fedirrel.htm

If you believe Doug Norland of Prudent Bear credit has been expanding at an alarming rate forever but also right through the last few months while the world's central bankers have apparently been "draining the system of liquidity."

Doug Norland's weekly updates on the Crdit Bubble can be viewed here:

http://www.prudentbear.com/archive_home_com.asp?category=18

Now Bill is telling us that even the "irrelevant" liquidity drain in M3 terms in the US is a fiction.

Finally, I read a piece by Antal Fekete the other day that pointed out that there is no longer any true "money" at play in the world; what we are exchanging are debt instruments.

And who is going to pay off these debts... that's right, our children.

Not to be alarmist but...

"Soon they'll be breeding us like cattle! You've got to warn everyone and tell them! Soylent green is made of people! You've got to tell them! Soylent green is people!"

Not to be alarmist, but ... all this tells me that precious metals are destined to rise ... They seem archaic to "believers" in the US economy, but I think Europeans, Middle Easterners, Indians, and Chinese all feel less certain of the modern world, and more connected to their past - when precious metals ruled!

Here's a graph attempting to compare M3 annual growth, fed rates, 2y and 10y note rates since 1980.

http://playumbrella.com/rates/rates-1980-2006.gif

Disclaimer: I made this graph with data obtained from http://www.federalreserve.gov/RELEASES/h15/data.htm and from the M3 site Bill lists. Some approximations made for the M3 months Feb 06 to June 06. M3 growth is calculated monthly over month of previous year. The spreadsheet is at http://playumbrella.com/rates/m3-publish.xls

This version adds GDP data (see note (*):

http://playumbrella.com/rates/rates-1980-2006-gdp.gif

(*) Quarterly GDP data (growth over preceding period") is extracted from and duplicated (possible source of errors!) to a monthly basis:
http://www.bea.gov/bea/dn/nipaweb/TableView.asp?SelectedTable=1&FirstYear=2004&LastYear=2006&Freq=Qtr