All Clowns Must Be Destroyed Message Board

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Pastimes : All Clowns Must Be Destroyed

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To: Oblomov who wrote (15443)	3/8/2000 9:05:00 PM
From: pater tenebrarum	Read Replies (1) of 42523

Andrew, i don't know how they measure the 'multiplier', but i don't think it means what you imply it means... to wit: the non-bank financial institutions like Fannie Mae, Ginnie Mae and Freddie Mac have been expanding their balance sheets in recent years at a breathtaking pace. when they do that, no new credit is created, as only banks in conjunction with the Fed can do that, so their activities will not have an effect on the money supply. but the velocity of money has been increased through their activities, and that has helped fuel the bubble. considering that at the same time the Fed has indeed helped increase the money supply vastly in recent years, i can not imagine that a decrease in the multiplication effect has taken place. i would rather expect the opposite to have happened. look at it another way: neither households nor corporations have shown an unwillingness to take on fresh debt. in both cases debt is growing faster than income, and has done so for years. 'pushing on a string' only happens when there is an unwillingness by borrowers to borrow and lending intermediaries to lend. neither is the case. so the question remains: how do they arrive at this 'multiplier'?

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