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Strategies & Market Trends : ahhaha's ahs -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (1383)	3/5/2001 12:37:30 PM
From: Ahda	Respond to of 24758

What I don't understand is if the FED creates money how could they possibly control whether that money goes into new productive assets or working capital? That probably is left to the discretion of the banks If there are too many dollars out there discretion maybe becomes less. The Fed can't control how money is used just think net bubble.

To: GraceZ who wrote (1383)	3/5/2001 1:15:33 PM
From: ahhaha	Read Replies (2) \| Respond to of 24758

They can't, so they only try to control the overall availability of money. In the past they had much better control because C&I loans were the primary engine for economic growth. C&I loans have been growing very slowly since '94 relative to previous expansions. There are many reasons for this including a movement to finance using contribution rather than borrowed, capital. It is rather humorous that you contrast "productive assets" to "working capital". Your humorous contrast does expose a truth in this era and that is that working capital is often working in investments in other companies, i.e., in paper assets rather than in physical assets of plant and equipment. This reflects more than a will to avoid "productive assets". It shows that the cost to invest in efficient plant is tremendous, because the plant must compete with existing facilities and because the scale of the investment must so great as to achieve an economy. The result is it's better to invest in someone else's determination to create such plant because the liability is effectively less. Better stated, the return integrated over the risk profile is better.