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Gold/Mining/Energy : Precious and Base Metal Investing
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To: Elizabeth Andrews who wrote (13112)6/27/2003 12:07:07 AM
From: LLCF  Read Replies (2) of 39344
 
<My point is that we don't know what the money that the person that gets from Fannie does with it, except spend it, which is why I see it as a recycle function and not creating money.>

Well, FNM essentially does the same function as a BANK, not Exxon, as far as I can see no?

<Balance sheet leverage is different than the multiplier effect created by new money from the Fed to the banking system.>

I'm confused as the 'multiplier effect' people use economically speaking vs fractional reserve banking that many claim 'creates' money. FNM seems to me to be much more like a bank, than Exxon.

< Fannie has to borrow to lend, the Fed doesn't. It creates new money, which makes it quite different. >

Yea, when it prints money... but when it creates credit in the banking system is that money? It sounds like you're saying banks are simply recyclers of money also? In fact they need reserves to lend against. It seems the fed's constant bickering about FNM's sliver of equity being large enough or not isn't much different than the different levels of 'capital' that banks keep to lend against.

I'd like to hear input as to whether people believe the fractional reserve banking system 'creates' money??

IN any case FNM has essentially THE SAME rating in many peoples minds as the treasury... so it can borrow and lend FOREVER. Now is that creating money??? Maybe technically not, but it has the license [and has indeed been] to borrow at the best terms on the planet bar one in order to make loans on homes.
If nothing else, they essentially allow the household unit to me much more leveraged than before ever before. IMO the effect FNM has had on the average persons leverage position blows away anything ever bank ever did.

DAK
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