Clown-Free Zone... sorry, no clowns allowed Message Board

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

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To: Haim R. Branisteanu who wrote (134918)	11/16/2001 6:49:44 PM
From: Oblomov	Read Replies (1) of 436258

Haim, banks, mortgage lenders, and GSEs can print money in the form of credit(M2) rather than reserve deposits(M1). The Fed's printing activity shows up in M1 by definition (see what happened to M1 in the wake of 9/11). This is the "window" through which the Fed operates: stls.frb.org This isn't to say that the Fed doesn't "guide" M2&M3 through it's manipulation of interest rates. It does, but not directly. More money supply in relation to goods demanded equals inflation. But what if goods aren't in high relative demand? What if cash money is in demand instead of goods? What if there is a systematic decline in corporate and consumer credit quality? What if borrowers retrench and stop demanding credit? I attribute a large portion of the bump in M2 to the initiation of 0% vehicle loans during October-November. JMHO.

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