Re: [Pen-l] M-3 supply and our current crisis

[Bill Lear <rael@xxxxxxxxxx>]

On Saturday, November 15, 2008 at 19:40:19 (-0500) Jim Devine writes:
>
> Bill Lear <rael@xxxxxxxxxx> wrote:
>> I'm curious what people here think about the claim that the
>> treasury department, by printing gobs of money, is responsible
>> in part for the current crisis.  The claim is M-3 has gone
>> up 14% and 17% in each of the last two years, leading to p-e
>> ratios of 26-1 and a stock market inflated by almost 100%.
>> This seems like a rather shallow claim, but I'm not sure what
>> M-3 has to do with all of this.  Anyone here care to refute
>> this?
>
>the reason why the Fed stopped measuring M3 is not to cover up its
>malfeasance (a common right-wing theory) but because the Fed has no
>control over it. the growth of M3 is much more of a result of the
>bubble economy than it was a cause.

But, you say "much more", so does that mean that M3 growth could have
partly caused it?  Why exactly does the Fed have no control over M3?

>> Also, what about the notion that Alan Greenspan pushed hard for an
>> interest rate reduction in order to get people to buy more houses that
>> led to the housing bubble?  I find this dubious, and contrary to
>> what I've read.  Any truth in this?
>
>AG responded to the 2001 recession -- and fears of deflation -- by
>cutting rates to the floor. This moderated the recession, and at the
>time many praised the Fed for doing this. This had the effect of
>sparking the housing bubble. In turn, that bubble (along with the
>military build-up and tax cuts for Bush's rich cronies) allowed a
>moderate prosperity. At the time, AG and other right-wingers denied
>the existence of the housing bubble and the gigantic superstructure of
>toxic debt that grew with it.

So, no evidence (I couldn't find any) that Greenspan's motive was to
get people to buy more houses?


Bill
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