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To: xcr600 who wrote (9812)	9/14/2001 8:28:00 PM
From: RockyBalboa	Read Replies (1) \| Respond to of 13094

Whew, that a real wacko...

To: xcr600 who wrote (9812)	9/14/2001 8:33:31 PM
From: RockyBalboa	Respond to of 13094

As you ask. The fed is adding money, so was the ECB and the Japanese national bank. But adding liqidity means that they offer volume tenders or reverse repos at a predefined interest rate (in the 3.5% range now) for short term. Adding money through repos works in that the lender purchases Treasuries with the obligation to sell them back at a fixe price, including the accrued interest, so the resell price is a function of the offered short term interest rate. Therefore it creates liquidity for the duration of the repo agreement. The tenders always have a maturity, ranging as low as one day, but can be very well weekly money. That means that the added liquidity will be removed (or in the case of repos: the 2nd part of the contract is being settled) later on if not replaced by new tenders. It is important that this money shall not be spent but strictly used to cover short term payment dues mostly by banks. If there is no money offered by the fed and commercial banks need some for example to pay, a Billion due tomorrow, or due monday, or tuesday they must borrow it. If there is noone of the other banks lending it (because there is no money to lend when all banks utilised their short term limits), there can be gouging in interest rates (remember the 700% interest rate in Swedish Corona, or 4000% in Greek Drachmas)? The 12B in grants is a different story: The airliners want to see more or less, "equity", or subsidies from the state. Without removing it, or perhaps only through long term future tax payments by the companies once they turn in profits...