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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: basho who wrote (49315)	1/9/2006 11:09:14 PM
From: mishedlo	Read Replies (1) \| Respond to of 110194

The following paragraph is proof that he understands that money in DDA accounts is not backed by cash. Not onltly that it is proof that it should be. Since January 1994, banks and other depository financial institutions have initiated sweep programs to lower statutory reserve requirements on demand deposits. In a sweep program, banks “sweep” funds from demand deposits into money market deposit accounts (MMDA), personal savings deposits under the Federal Reserve’s Regulation D, that have a zero statutory reserve requirement ratio. By means of a sweep, banks reduce the required reserves they hold against demand deposits. As a result of the sweep program one could argue that the money definition outlined above will not cover the total money supply. This criticism, however, is misplaced, for it has nothing to do with the definition as such, but with the difficulties of measuring money, which was transferred out of demand deposits by banks without the depositors’ consent. (The Federal Reserve of St. Louis provides a monthly estimate of the amount of money swept.) Mish

To: basho who wrote (49315)	1/10/2006 11:20:13 AM
From: Tommaso	Read Replies (1) \| Respond to of 110194

OK fair enough. I must say that what he says sounds more like what someone writing 200 years ago might say about banking as it had developed up to that point. I was in fact taught these things fifty years ago in an introductory economics course, and to see them presented as if they were newly-discovered weaknesses in the banking system is odd. What has happened, as everyone knows, since the 1930s is that deposit insurance has put an end to runs on banks and has also introduced a permanent bias in the direction of inflation into the money supply.