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Politics : Welcome to Slider's Dugout
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To: bullbud who wrote (8849)3/28/2008 2:59:31 PM
From: RonMerks  Read Replies (1) of 50482
 
Re- 'And to help fund it all, the Fed's account, known as "US Government Securities owned outright", was down by $32.2 billion'

Is that you saying that, or the Mugumbo Guru (he should know better)?

I believe the reason their Government Securities owned outright are down by $32 Billion- is because that is how they sucked $32 Billion of cash out of the system and slapped gold and commodities upside the head.

How the Fed increases, or decreases money supply- from Wikpedia.

en.wikipedia.org

When a central bank is "easing", it triggers an increase in money supply by purchasing government securities on the open market thus increasing available funds for private banks to loan through fractional-reserve banking (the issue of new money through loans) and thus grows the money supply.

When the central bank is "tightening", it slows the process of private bank issue by selling securities on the open market and pulling money (that could be loaned) out of the private banking sector.

It reduces or increases the supply of short term government debt, and inversely increases or reduces the supply of lending funds and thereby the ability of private banks to issue new money through debt. Note that while the terms "easing" and "tightening" are commonly used to describe the central bank's stated interest rate policy, a central bank has the ability to influence the money supply in a much more direct fashion, as explained earlier in this paragraph.

Ron
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