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Strategies & Market Trends : Heinz Blasnik- Views You Can Use -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (2801)	6/27/2003 11:58:50 PM
From: Don Lloyd	Read Replies (1) \| Respond to of 4907

Grace, Concerning "it isn't FED who is creating the low rates". M2 growth since Jan = 580 -> 605, (605 - 580)/580 = 4.3% Monetary Base since Jan = 700 -> 720, (720 - 700)/700 = 2.9% The $20 billion came from $12B permanent and $8B RP free float. Currency since Jan 628 -> 648 = $20B I wasn't concerned with this particular time frame. Over the FED's entire loosening cycle it has enabled banks to create new fractionally reserved loans for both individuals and businesses. This has both brought new buying power into existence and reduced the market interest rates for loans as their supply has increased. The increased supply of loans and their subsequent lowered interest costs have resulted in market prices of housing and real estate being substantially bid up. What do you know? The base is going into the public's currency preference. That means FED is only supporting transaction balances. Remember the example about why the money supply has to grow? Isn't it curious no one attacked it? It only represents the refuting argument why 0 money growth creates problems. The total money supply is always the sum of the individual money supply held by individuals and other entities. If 30 people all liquidate $1000 worth of their baseball card collections on the first of the month, hold on to the $1000, and then buy $1000 worth of canned goods on the 30th day of the month, the total money supply requirement is a level $30,000 throughout the month. If, OTOH, each of the 30 people choose a different day of the month to liquidate their cards in the morning and buy canned goods in the afternoon, the total money supply requirement is a merely $1,000 as no two people necessarily need to hold money at the same time. Thus the total demand for money to hold, which is the total money supply, is only loosely connected to transaction volume. Even if the demand for money to hold exceeds the available money supply, all that happens is that the purchasing power of money increases. Since the demand for money to hold is NOT a demand for money per se, but rather a demand for purchasing power, this is satisfied by the increase in purchasing power. Regards, Don

To: GraceZ who wrote (2801)	6/28/2003 2:12:09 AM
From: LLCF	Read Replies (1) \| Respond to of 4907

<M2 growth since Jan = 580 -> 605, (605 - 580)/580 = 4.3%> According to Grant's: Last 3 months M2 Growth= 7.1% Last 6 months M2 Growth= 6.8% Lower than your annualized 8.6% <FED erring on the side of restraint or better put, rates falling away from target:> No, see previous post. <What do you know? The base is going into the public's currency preference. That means FED is only supporting transaction balances. Remember the example about why the money supply has to grow? Isn't it curious no one attacked it? It only represents the refuting argument why 0 money growth creates problems.> What does all that mean? Is it relevant to the topic at hand which seems to be is the fed leading or following? DAK