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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era
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To: Mike M2 who wrote (1332)2/23/1999 3:23:00 PM
From: Freedom Fighter  Read Replies (2) of 1722
 
Mike,

>>Porcupine, you raise many good issues my note addresses the Monetary school see
Message 7984968;

Are you talking about FNMA, FHLMC in the current environment because I have a question about this?

My understanding of the 'basics' of this follows:

One thing FNMA and FHLMC do is borrow short and then buy mortgages(lending long). They make the interest rate spread. This process removes mortgages from general circulation and places 'money' in the hands of the former mortgage holders. They then invest in other financial assets. This is a financial asset credit expansion process and seems to be what was happening during the recovery period of last year's crisis. A sort of back door systematic bailout.

But this is what I don't understand. The loan money that FHLMC and FNMA used to buy the mortgages had to come from somewhere or something else (another asset). Meaning there was no credit creation unless it came from banks in the form of new money. If so, then the Austrian analysis still holds. This was a topic and route for easy money that was discussed by Ludwig von Mises in "Human Action".

If I am not understanding completely, please explain.

Wayne
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