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To: Real Man who wrote (95669)	4/18/2001 11:33:06 AM
From: Andrew G.	Read Replies (1) \| Respond to of 436258

So what horrific revelations should we expect to hear? Bank failures, loan defaults buy major telcos ? Looks like all this excess $ is getting pumped into equity market rather than to pay down debt. Is that the way it should work ?

To: Real Man who wrote (95669)	4/18/2001 11:38:38 AM
From: Ilaine	Read Replies (1) \| Respond to of 436258

I can't tell whether you really want to learn or not. Most people are satisfied with a tiny bit of knowledge and there's no point discussing anything of substance with them. Since I don't know you I'll assume that you really want to learn. >>>>In practice, the connection between reserve requirements and money creation is not nearly as strong as the exercise above would suggest. Reserve requirements apply only to transaction accounts, which are components of M1, a narrowly defined measure of money. Deposits that are components of M2 and M3 (but not M1), such as savings accounts and time deposits, have no reserve requirements and therefore can expand without regard to reserve levels. Furthermore, the Federal Reserve operates in a way that permits banks to acquire the reserves they need to meet their requirements from the money market, so long as they are willing to pay the prevailing price (the federal funds rate) for borrowed reserves. Consequently, reserve requirements currently play a relatively limited role in money creation in the United States. << ny.frb.org The Monetary Control Act of 1980 only permits the Fed. to impose a reserve requirement of 8% to 14% of transaction deposits (checking accounts) and up to 9% of non-personal time deposits (those not held by an individual or sole proprietorship. The Fed. can also impose a reserve requirement of any size on the amount depository institutions owe, on a net basis, to their foreign affilliates or foreign banks. The Fed may not impose reserve requirments against personal time deposits except in extraordinary circumstances, after consultation with Congress, and by the affirmative vote of at least five of the seven members of the Board of Governors. The Fed does not at this time impose a reserve requirement on non-personal time deposits. There is no reserve requirement on M2, M3, or MZM. We've been talking about this on a thread that Thomas M. started. If you are interested in joining the discussion, I suggest you start reading here: Message 15578613 I have to get back to work now. Talk to you later or not, up to you.

To: Real Man who wrote (95669)	4/18/2001 11:51:29 AM
From: Ilaine	Read Replies (2) \| Respond to of 436258

One final point and then I really gotta go - anyone who thinks the Fed's actions are directed towards the stock market per se is missing the big picture. The Fed's actions are directed towards the economy as a whole. To the extent that it can keep the economy from collapsing, it will. One major goal is to avoid sudden movements caused by liquidity crunches - they call those "shocks." Little slow movements downward are fine - look at the Nasdaq, down roughly 60% in one year.