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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: edward miller who wrote (14282)	6/6/2000 9:54:00 PM
From: MrGreenJeans	Respond to of 15132

Ed Then how do you explain the sharp rise in the money supply late last year while interest rates rose? The Fed has been raising interest rates, but at the same time (until recently) pumping huge amounts of money into the system through repos. Therefore tight money supply and increasing rates have not been related in the last year. The money supply contracts and rises because of seasonal demand and supply. Late last year the Federal Reserve made sure there was liquidity in the market, that is increased the money supply, for a number of weeks because of Y2K concerns for example. I think if you look at M1, M2, M3 from mid 1999 until now you will find the Federal Reserve has decreased the money supply in real terms, on a consistent and systematic basis quite dramatically. This is one reason why Bob turned cautious towards the end of 1999. The fact is the money supply and interest rates are directly related. Look at the M1, M2, M3 numbers don't take my word for it. I refer you to the St. Louis Federal Reserve site. The numbers tell the story.