Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: ild who wrote (3886)	1/4/2002 3:00:27 PM
From: ahhaha	Read Replies (3) \| Respond to of 24758

Modest relative to what? I don't think you understand how the federal reserve system works. Annualized, the reserve creation is about $50 billion/yr. Last year they created maybe $80 billion. The quantity of loans supported by this raw money is 10 times assuming the reserve requirement in 10%. So you're looking at $500 - $800 billion in loan creation potential which shows up as M2. That assumes C&I loans aren't running off. They are, so the ability to create money goes elsewhere depending upon public preferences. Into currency and savings of various forms. Ability to create money should be expressed as realization of raw money with the reserve requirement leverage factor. The factor with currency is 1:1 instead of 10:1 as it is with loans. FED is creating raw money which isn't being borrowed because debt is being paid down. The raw money is going into currency which doesn't help GDP growth much, but does help monetary inflation. We haven't seen monetary inflation since the 19th century, so none of the pundits of money have any idea about what is coming. The RP interventionism FED practices has so destabilized the market for money that no one including them has a clue about what he proper rate of interest should be. This is tantamount to saying that interest rate policy is irrelevant. Interventionism is rendered moot and FED can't get tapped out entities to borrow or extended lenders to loan. Borrowing can't drive GDP now. The only way to get GDP to grow is to lower taxes. That won't happen because the Democrats have their war on wealth to wage.