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Strategies & Market Trends : MDA - Market Direction Analysis
SPY 680.44+0.6%4:00 PM EST
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To: Wayners who wrote (51209)5/19/2000 5:26:00 AM
From: KyrosL  Read Replies (1) of 99985
 
The "Fed" is not the Federal Government, it is the US Federal Reserve Bank. When the Fed sells short term notes to raise or lower short term interest rates, the resulting proceeds stay in its vaults (i.e. essentially disappear into money heaven) and the money supply contracts -- it certainly does not spend this money! When it buys short term notes to lower short term interest rates, it creates money (essentially out of thin air) and the money supply expands.
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