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To: Ilaine who wrote (106122)	6/2/2001 3:08:49 PM
From: patron_anejo_por_favor	Read Replies (2) \| Respond to of 436258

<<And now it's going to hell in a handbasket because we're putting it into the money market and CDs? There's a reason why people don't put their extra money into M1 deposits - it's called "interest.">> Noland keeps harping on money market asset growth not because "savings are bad", but because the instruments underlying those assets are "invested" in often questionable entities (at least to the extent that people think of them as "cash"...they are far from it). Much of the returns underlying money markets are based on assumption of increased risk by the lenders (money fund "buyers")...in ABS, MBS, SWAP's and derivatives of the above, commercial-paper of various quality (including Cali-Ute CP for example, prior to their downfall), none of which have been "safety-tested" in a prolonged economic downturn, and many of which received higher credit ratings than they otherwise deserved by dint of being "insured" by a woefully underfinanced credit insurer such as MBI or ABK. In other words, the shadow side of the expanding money market is a HUGE expansion in debt on the part of the financial entities who are exchanging them for your cold, hard-earned, CASH. THAT's the significance...and it gets no attention from the popular media. When problems finally occur, they will be fast, furious and widespread due to the domino effect of liquidity trapping, and what will likely occur will be massive devaluation of money fund assets (you know, that price thingy that always reads 1.00 in your statement will start dropping). I'm convinced that until that happens, the issue will get little or no press coverage (but by then of course, it will be too late). Believe him or not (the latter at your own risk), Noland is extremely valuable because he's one of the very few columnists bringing up these issues on a regular basis (the only other coverage I can recall was an article in Barron's by the inventor of money market funds, who appeared to agree with Noland).