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To: NOW who wrote (42572)	11/30/2000 5:20:21 PM
From: pater tenebrarum	Respond to of 436258

yes..but easing has usually a profound psychological effect on the market. however, you're right, they keep printing at incredible speed to halt the rot in the credit markets and the stock market.

To: NOW who wrote (42572)	11/30/2000 5:57:19 PM
From: Perspective	Read Replies (1) \| Respond to of 436258

David, Heinz - this is something that's bugged me for a long time. As far as I know, since the Fed can't give away money, it is limited to loaning it. Therefore, every action the Fed takes involves either borrowing or calling back loans. And, as far as I know, they all impact the level of interest rates. Therefore, I don't think the Fed can print without impacting interest rates. Granted, they define a "target range" for rates, and have some latitude to print more or less as long as market rates stay within their predefined band. However, due to the way they target short-term rates now, I think they are forced to do whatever the market demands in order to maintain rates at the target. If everyone wants to borrow money to speculate in financial markets, they must print (loan) money in order to hold rates down to the target. Conversely, if nobody wants to borrow money any more, or there is a net paying down of loans, they will have to become a net borrower, eliminating liquidity, in order to prevent rates from falling significantly off their target. They can do some open market operations in longer term securities, but I think the vast majority of their activities are restricted to the money markets. Therefore, I think your implication that the Fed can "print" without easing has very little truth to it. Printing is easing, and easing is printing, unless I'm missing something. BC