prudentbear.com
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I don't know where people have gotten this idea.
Posted By: Mr. Moto
Date: Friday, 1/7/0, at 7:20 a.m.
I truly don't.
Now John Crudele, friend to the bear clan and normally accurate where numbers are concerned, is under the impression the Fed must drain money from the system. nypostonline.com
First of all, it's yet to be discovered whether any of the *$23 billion increase in the December currency component of the M1 aggregate will be spent. And, somehow, I doubt that it will in any inflation-inducing amounts.
Had the liquidity options been exercised in any meaningful quantity then, yes, the Fed would probably put a drain on. However, none of those options were exercised.
What did happen is that profligate funding by the Federal Reserve via large, long-term repo's spilled-out into unintended ( MAYBE unintended ) areas of investment. See Paul Kasriel's recent commentaries for more on that; or just got to the Fed's data sets and review the categories of bank credit since October. Furthermore, if you, personally, abide by either the money or system multiplier effects, you can imagine the consequences of over $100 billion in long-term repo's; and imagine too why one analyst, along w/ yours truly, suggested the temporay funds were more like a "quasi-coupon pass."
This is the last I'll mention the topic. I promise.
For whomever it was that requested I note percentages to permit others a more gainful understanding of what I'm talking about, $23 billion is about 3x the unadjusted growth in the currency component when compared with December data for the past decade. Not too bad, considering....
Also, for whomever it was, you were correct. I appreciated the recommendation.
And, lastly, the few convenient omissions in this one could really get me steaming: * biz.yahoo.com * Another time, maybe.
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*The $23 billion is from data unadjusted for seasonal considerations.
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