I am amazed that the Feds announcement to cease publicizing M3 reports did not get the headlines it deserved. Then it hit me, the financial press quickly figured out that the "little people" would not understand it anyway, so why report on it. This makes sense.

Now for astute investors who really understand what is going on, it’s a different story. Unfortunately, that leaves us, and the professional investors who are in the know. "Joe Six Pack" on the other hand, could care less.

Here's what the Fed said, “On March 23, 2006, the Board of Governors of the Federal Reserve System ceased publication of the M3 monetary aggregate. The board also ceased publishing the following components: large denomination time deposits, repurchase agreements and Eurodollars.”

I realize that this is really boring stuff, but here we go;

So what is M3? You need to understand money supply to understand its importance.

M3 refers to the broadest category of money in circulation. This includes;

1) M1 which is the sum of currency, or paper dollars, that can be spent immediately by the public.
2) M2 is M1 plus assets that have been invested for the short term, including money market mutual funds and other financial transactions.
3) So M3 is M2 plus all long-term deposits, including institutional money market accounts.

Once you understand this you can move to the next step which is Inflation. We can break inflation into two broad categories.

1) Money Supply Growth Inflation- We rarely if ever hear about this type of inflation.
2) Price Inflation- This is the type of inflation they try to get us to focus on.

So, by no longer reporting M3, Money Supply Growth Inflation can be hidden, and Price Inflation can become the main focus. Oh how convenient.