Strictly: Drilling and oil-field services Message Board

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Gold/Mining/Energy : Strictly: Drilling and oil-field services

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To: Redmond Quain who wrote (89219)	3/25/2001 6:49:44 PM
From: patron_anejo_por_favor	of 95453

<<Is MZM (approximately) money created by the fed by buying debt?>> In part: MZM=M2 + institutional money funds - small denomination time deposits M2=M1 + savings + small time deposits + retail money funds M1=currency + total checkable deposits + traveler's checks MZM is increased by any activity that moves funds from other assets into currency, checkable deposits, or money market funds. The Fed open market activites (such as coupon passes and repo purchases) have the effect of increasing asset bases in the member institutions, permitting increased lending activity on the increased reserves (greatly simplified, but that's the effect net-net). However, MZM is also influenced by asset sales (including stocks) and, importantly, by equity draw-down resulting from mortgage refinancings. Since stocks have been dropping and refinancings have been skyrocketing, the recent increase in MZM is only partly attributable to Fed open market actions. Make no mistake though, the pace of Fed open marked actions has been far in excess of the current GDP growth rate, imparting inflationary pressure on prices, increased savings AND/OR increased asset prices. Regards Patron

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