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

To: GraceZ who wrote (5561)	11/4/2002 1:03:14 PM
From: ahhaha	Respond to of 24758

What is non-sterilized currency intervention? When FED buys/sells dollars they end up increasing/decreasing the monetary base and that may be at odds with prevailing monetary policy. To avoid the base effect they must engage in counter actions, usually RPs with foreign central banks, so that there is a net neutral flow of money but a lot of presumably market price affecting action. The counter actions are called sterilization. McCulley wants FED to drive down the dollar by selling dollars without sterilization. This would have the effect of decreasing the monetary base. McCulley thinks driving down the dollar will cause price inflation which will neutralize the mythical deflation. Aside from the impossibility of changing the market value of the dollar except instantaneously a falling monetary base is explicitly deflationary! Thus, the guy is confused. He wants an unwarranted intervention that would bring about the opposite of what he thinks, but what he wants isn't coherent either.