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To: Freedom Fighter who wrote (211985)	12/31/2002 11:40:41 AM
From: yard_man	Read Replies (1) \| Respond to of 436258

Wayne -- wasn't my info -- came from dailyreckoning -- but thanks so much for checking that -- maybe all that cash hits the market the first of the year?? not sure it really matters to me as some of it will find its way into gold, I think

To: Freedom Fighter who wrote (211985)	12/31/2002 1:30:00 PM
From: GraceZ	Read Replies (2) \| Respond to of 436258

The Fed isn't the only one who can create money. The Fed has cut permanent creation to almost zero in the last two-three months after cutting it in half in the previous four. The rise in the monetary aggregates is independent of Fed money creation at this point in the cycle. FED doesn't need to increase reserves because reserves are quite high. If reserves are sufficient all you need to do to create money is for the banks to make loans. People are taking down loans, paying off mortgages with newly created money (created by loans) and as the old loans are paid off the money is left floating around in the system unless the Fed does matched sales. The biggest increases have been in institutional MM accounts. In a certain respect the Fed is responsible because they lowered the Fed funds rate...but this doesn't have a direct effect on long rates, long rates dropping has to do with inflation expectations disappearing and a flight to quality in the bonds that mortgage rates are pegged to as well as an enormous amount of money seeking yield in MBS. As all the high priced debt gets replaced with lower cost debt, the monetary aggregates will continue to expand without the Fed engaging in permanent creation. Before someone points out (as they always do -g-) the amount and number of REPOs let me remind them, REPOs are done to defend the target interest rate, not to increase reserves. You can't use them to increase reserves except on an extremely short term like overnight. They are used to match the instantaneous demand that might result in rates pushing up the target interest rate. They have a free float value but that has remained largely stable. Right now loan demand is almost totally related to retiring more expensive debt or perversely retiring low interest short term debt with higher cost long term debt (yikes) in companies with deteriorating credit. There has been some rise in C&I, but not enough to say that the trend has reversed it's long downtrend.