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Pastimes : Clown-Free Zone... sorry, no clowns allowed

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To: JRI who wrote (66677)	2/11/2001 8:43:05 AM
From: flatsville	Read Replies (1) of 436258

JRI- Until heinz can get back to you-- Wasn't the bubble starting in Oct. '99 really a function of Fed daily measures (repos buybacks), and (obviously) not previous rate cuts.....it seems that there is so much focus on the Fed cut the discount/funds rate(s), but that the REAL emphasis should be on the pumping down by these daily measures...that is the more immediate pump method, and it seems to work like a charm.....huge increase in late Dec./Jan...the (Naz) market took off... Part of your answer lies in bobcor's post-- Message 15333625 Greenspan's rush to lower interest rates in January was a dramatic policy reversal after the Fed chief orchestrated a campaign to drive interest rates to a nine-year high between June 1999 and May 2000. The goal was to squash what has since turned out to be an illusionary threat of inflation. He was tightening like mad in the fall of 1999 and at the same time pumping like mad via repos and coupon passes (not treasury buybacks...the Fed doesn't handle those.) Go figure...It was certainly bizarre behavior. The only explanation we could come up with was he was reacting to the perceived y2k threat...reacting to an external shock by adding liquidity while trying to stay the party line byraising interest rates. You can monitor the daily pump here (open market operations)-- app.ny.frb.org It is reliable unlike Yahoo! or CBS Marketwatch reports. My understanding is, that the Fed frees up liquidity for the banks via the repo (buybacks), and sitting on non-perfoming cash,... Money creation (liquidity) by the Fed works like this-- 203.79.82.35

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