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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: mishedlo who wrote (2742)3/23/2004 1:54:37 PM
From: CalculatedRisk  Read Replies (2) of 116555
 
Sterilized vs. unsterilized. Here is an example:

If Japan prints Yen, buys dollars ... the amount of Yen in circulation increases by the amount of Yen printed. This is called "unsterilized" since it increases the money supply.

If Japan prints Yen, buys dollars AND then sells Japanese treasuries to raise the equal amount of Yen ... there is no increase in the money supply. This is called "sterilized".

Earlier I argued that one of the reasons Japan might be buying dollars was to increase their money supply. But this would only work if the intervention was unsterilized. That is why tooearly is posting that it looks like I am wrong ... the intervention is apparently sterilized and Japan is not using this technique to increase the money supply.
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