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To: Siddhartha Gautama who wrote (3294)	3/31/2004 8:46:56 PM
From: russwinter	Respond to of 116555

He seems to imply that sterilized and unsterilized is academic because it's (was?)a ZIRP (zero interest rate) environment, and there is no private -sector confidence in utilizing money. Therefore somehow these deposits going into banks are just benign. Benign, that is until inflation peeps up it's head, which my theory. Then it quickly becomes toxic. Just waiting until the right conditions (now), and playing with fire. His point about FB redemption I believe relates to FEFBs (foreign exchange financing bills). Yes, they may get redeemed, but they have been immediately reissued and added to in spades, like about Y79 trillion worth (or more?). I just don't get his point at all on this. To me if it looks like a duck, walks like a duck, and sounds like a duck, it's probably a duck.

To: Siddhartha Gautama who wrote (3294)	3/31/2004 8:50:16 PM
From: CalculatedRisk	Read Replies (1) \| Respond to of 116555

Thanks for that article, however the author is wrong on one point: Takehiro Sato wrote: "The only step where it has room to exercise discretion is whether to absorb (sterilize) intervention capital. Yet the economic effect of unsterilized intervention is no different than a rate cut." My comment: this is correct. Sato continued: "With Japanfs short-term money markets already at the zero-interest rate limit, unsterilized intervention no longer has any significance." My comment: Sato is right about not having an impact on interest rates, but he is incorrect because there is a significant reason for unsterilized intervention. The reason (as opposed to sterilized intervention) is to create inflationary expectations. I explained this in my post (the caveat at the bottom still holds<g>): Message 19939130 I recommend reading the replies to my post too. Several more experienced people have pointed out that it appears Japan is sterilizing their interventions.