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To: Ilaine who wrote (95)	3/28/2001 7:54:25 PM
From: JF Quinnelly	Read Replies (3) \| Respond to of 443

If the bank has $10,000 in CDs and I borrow it and put it in a money market account, the Federal Reserve has no control over that at all. If all I do is write checks, and never touch currency, how did the Federal Reserve create money? I think the bank and I did. Currency is almost a non-issue to the Fed. It comprises a minute amount of the money supply. The Fed is far more interested in the large quantity of money held as bank balances because it can be used to "create" money by the lending officers at your local bank. Your bank actually created credit, which for your purposes functions as money. (The fact that it's credit would be of interest mostly to the Fed, and your bank). But credit gets extinguished as you repay your loan, and the money supply will contract by that $10,000 if the bank doesn't have another suitable customer. If you define "money" as something backed by, or regulated by, the Federal Reserve, then that's what money is. And if you define "money" as something that is backed by gold, then that is what money is. For you. Money in this country, at this time, is part of the banking system as regulated by the Fed. Right now gold is just a precious metal. The Federal Reserve has reserve requirements on transaction deposits only, in the amount of 10%, essentially checking accounts. There is no reserve requirement on savings accounts, money market accounts, or CDs I don't think this is accurate. Otherwise a bank could make a loan of $10,000 against a single dollar of savings; no reserve needed. The fraud capable without reserves would make the S&L debacle look tame by comparison.