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To: XBrit who wrote (5325)	7/24/2000 12:22:42 PM
From: pater tenebrarum	Read Replies (2) \| Respond to of 436258

JM, simply put, with its targeting of the funds rate, the Fed simply satisfies all credit demand that exists at that rate...if demand pushes the rate up, the Fed simply provides more liquidity to the market to push the rate back down. you are quite right that the amount of repo's and coupon passes that are added to the system are totally inconsistent with a tightening cycle. it's basically a phenomenon of the Fed outwardly appearing 'tough' with baby step rate increases, while supplying more than ample liquidity through the back door. we have never before had a tightening cycle during which the money flowed as freely as now... of course, that begs the question why are they doing this? and i think the answer is that they fear the credit and asset bubbles might implode unless they keep the wheels greased. a good example is the April dump in the NAZ...it was preceded by a three week period of flat , i.e. decelerating money supply growth. so now they're putting the pedal to metal again, to reflate the bubble again. most people are not aware of this, but much of the Fed's policies is simply ad hoc....and mostly it has to do with what the bubble is doing. it's bubble maintenance. other considerations are completely secondary (e.g. inflation - i don't think they worry about it at all).