MDA - Market Direction Analysis Message Board

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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 695.17

+0.2%

Jan 12 4:00 PM EST

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To: pater tenebrarum who wrote (44488)	4/1/2000 5:12:00 AM
From: nihil	Read Replies (2) of 99985

You have to remember that M1 is hardly growing at all, M2 is growing moderately (`5%) and M3 is almost completely out of control. M3, and more important short T-bills are exploding because the foreign ownership is mushrooming because of Balance of Trade Deficits. For the average foreign bank, US T-bills are the preferred cash reserve and are as liquid as anything recognized as "money (i.e. Eurodollars)." As the Fed raises the short-term rates, foreigners shift more and more of their reserves into T-bills, which earn 3 to 4 times as much as their domestic short term paper. In effect, the more we borrow to pay for imports, the more money we create. Raising interest rates simply creates too much money and ultimately will drive up prices, unless we are willing to continue to expand our Trade deficit.

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