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Gold/Mining/Energy : Precious and Base Metal Investing -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (13107)	6/26/2003 5:00:45 PM
From: Elizabeth Andrews	Read Replies (4) \| Respond to of 39344

Balance sheet leverage is different than the multiplier effect created by new money from the Fed to the banking system. Exxon could and does borrow to lend and spend. That's what Nortel essentially does when it provides credit to a buyer of its goods. Nortel can't create this money as it has to borrow to facilitate the sale and provide the working cappital to build the product. My point is that we don't know what the money that the person that gets from Fannie does with it, except spend it, which is why I see it as a recycle function and not creating money. This stream becomes a deposit somewhere but the sum of all the deposits only equals what Fannie has to borrow so there are zero gains to the system. Fannie has to borrow to lend, the Fed doesn't. It creates new money, which makes it quite different. It's what happens to the deposit base that is important, I think.