Zeev...
I think it is a mistake to connect the dots in such a way to think that the AG ramping has anything to do with politics.
A review of the history of the Fed would show that the Fed Chairman is not under the thumb of the presidency and George I/Greenspan is a good example of that fact -- it seemed that Greenspan was doing everything possible to get Bush I defeated. It was true then and remains true today that there is little (if any) love lost between AG and the Bush family so it makes little sense to think that AG is working hard to get Bush II reelected.
The real reason for the lack of presidential control is both the long term of the Fed Chairman and the fact that few (if any) politicians understand the workings of the Fed well enough to get involved. For the party in power, it has always sufficed to use the Fed as a convenient scapegoat when things go wrong and take credit for it when things go well.
Greenspan is on his own agenda, driven both by a genuine desire to do what he thinks is best for the nation and by ego - not wanting to go down as the worst Fed Chairman in history by first creating the bubble then sending us into a deep and long lasting recession. He is probably telling the administration more of what he is doing and why than he tells the public, but he is probably sugar coating the dangers somewhat. The administration, for its part, is glad that he is pumping as hard as he is and is helping with the jawboning as much as possible. Few of these people are idiots and they know what will happen both politically and economically if the Gambit fails.
As for M3 not growing (and the velocity of money slowing to a crawl) despite the massive pumping by Greenspan, I believe it is because the money being pumped in is going to the markets rather than to the economy. There is hardly any loan demand at all and until that demand starts to increase the Fed will be unable to inject money directly into the economy. Unfortunately, loan demand will not increase until capacity utilization increases and the debt of both the consumer and corporate America has been brought down to manageable levels - that will take a good while, I fear.
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