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To: patron_anejo_por_favor who wrote (226330)	3/7/2003 2:37:50 PM
From: ild	Read Replies (1) \| Respond to of 436258

trotsky (goldfish) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved sorry, the mistakes the Fed made during the boom can't be 'fixed' retroactively. and since their methodology hasn't changed, it not obvious at all what the alleged improvement in their policy supposedly consists of. on the contrary, i'd say they are busy compounding their mistakes, very similar to what happened in Japan. as for the rising gold price, this has happened due to a number of factors many of which are outside the central banks control...and in essence, it represents a vote of no confidence in the fiat system. Date: Fri Mar 07 2003 12:49 trotsky (fatty) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved the Fed adds and drains liquidity by buying and selling government and agency debt securities from the banks. however, contrary to the rumor that they somehow now have found a new secret formula to 'get it right', they simply use the same methodology they have always used since they abandoned money supply targeting. they simply look at where the FF rate is trading - if it is above the 'target rate' they add liquidity, if is below, they drain. needless to say, draining liquidity happens so rarely that one should perhaps mark those days on a calendar. as an aside, this methodology is deeply flawed - it has allowed a huge credit bubble to grow completely unchecked, bringing about both the artificial boom/bubble of the 90's and the inevitable subsequent bust. if money were left to the free market, we'd still have business cycles of course, but they would be much shorter in duration, allowing for a frequent, and far less damaging, liquidation of malinvestments. the current monetary policy framework otoh encourags malinvestments to pile up like never before ( and actively hinders their liquidation ) . the utter failure of the fractional reserve banking system in Argentina and likewise the failure of ultra-loose monetary policy in Japan prove beyond any doubt that this sytem does not work. of course there is an elite profiting from the system, therefore i don't expect reform until it fails completely and everywhere.