The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: nextrade! who wrote (26477)	1/8/2005 5:16:19 PM
From: Elroy Jetson	Read Replies (1) of 306849

So we see that the Money Supply is increased by both: the excess formation of debt by the subsidized over-lending system; the heavy Monetarist Tax of new money creation they call "price stabilization". What do I mean by this comment, If the Fed raised interest rates to 14% tomorrow, yet the money supply remained unchanged, I'm confident I could still borrow money around 5%. The interest rate on money is set by the supply and demand for money. a.) Lets say that I can borrow money at 5% during a period when the Money Supply is growing at a constant 8% annual rate. b.) Let's say that the Fed claims to have raised interest rates today from 2.5% to 14%, yet the money supply continues to grow at a constant 8% rate I've already said in part b that the supply of money remains unchanged. So if the demand for money remains unchanged, that is the Fed's claim to have raised interest rates doesn't change people's borrowing behavior, then interest rates should remain the same. If I could borrow at 5% before, and can still borrow at 5% after the Fed raises rates from 2.5% to 14%. Won't some banks raise their rates to 14%? Of course. The banking system is a cartel beholden to the Fed. The Fed holds political power over FDIC banks. They will raise their rates to 14% if the Fed insists and collect an extra profit of 11.5% on each loan (14% - 2.5%). Or more likely the "yield curve" will become inverted. They will lend money short term for 14% but will be pleased to make you a one year loan or thirty year loan at 5%. What if banks don't do this? There are many other places to borrow money other than banks. As you know, the bottom line is this. If the Fed really wants to increase interest rates, as they claim to be doing, they will have to see to it that the money supply grows more slowly. .

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