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Strategies & Market Trends : The coming US dollar crisis
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To: Sober who wrote (16458)1/20/2009 5:46:53 AM
From: stsimon  Read Replies (1) of 71456
 
The Fed most commonly uses reverse repos to temporarily destroy money, which offset temporary changes in the level of bank reserves. The Fed also makes outright sales of securities through the System Open Market Account with its manager over the Trading Desk at the New York Reserve Bank. The trade of securities in the SOMA changes the balance of bank reserves, which also affects short term interest rates. The SOMA manager is responsible for trades that result in a short term interest rate near the target rate set by the Federal Open Market Committee. It permanently destroy money by the outright sale of securities. These trades are made with a group of about 22 banks or bond dealers who are called primary dealers. Money is also destroyed by raising the reserve account at a bank.
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