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

To: LLCF who wrote (2851)	6/30/2003 11:38:07 AM
From: GraceZ	Read Replies (3) \| Respond to of 4907

I said: The real estate market strength isn't coming from FED's creation of money supply. Money supply is currently disconnected with interest rates. You said: I never even addressed that topic Grace... so apparently my ego harbours one less prejudice than you thought. Why do you see every statement as a personal attack? I made that statement because it is pertinent to the subject. This is what you said in the previous message: >>>>Also, if you remember the conversation started with talking about Fed accomodation and home prices, ie. a long term issue. You seem to be changing the topic....... again.<<< Since you can't bridge the connect I'll do it for you, real estate is rising on low interest rates (do we agree so far?), in order to prove that the Fed's actions are causing this you have to prove that either the rise in the money supply is causing rates to fall (that the connection between money and supply and interest rates is intact) or that the lower long interest rate that mortgages are based on is being set by the Fed when they lower the short rates and that they are actually setting those low interest rates rather than simply following the rate down as I've asserted. In a situation where the Fed was being looser than the market wanted to set the rate they would never have to do RRPs to keep the rate from falling below their target, in the past they merely had to slow the rate of RPs or shorten the term to trim supply enough to defend their target. The definition of Fed accommodation is when they set a lower rate than the market would. In other words if the market would normally set a higher interest rate than the rate the Fed wants to fix the Fed would only have to do RPs to keep the rate from rising above their target.