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To: Zeev Hed who wrote (7458)	11/8/1997 7:13:00 PM
From: Joseph G.	Read Replies (2) \| Respond to of 18056

Zeev, <<I know, the money supply is growing too fast, but I think a big chunk of this money is ending up in matresses in the developing world and as cash in underground economies.>> did you ever try to realise that the "currency in circulation", only a fraction of which can possibly be overseas (including developed world) and in so called "underground economies", is only 8% of M3? Is a fractional change in a fraction of 8% a lot? Joe

To: Zeev Hed who wrote (7458)	11/8/1997 7:34:00 PM
From: Defrocked	Read Replies (1) \| Respond to of 18056

RE:"I know, the money supply is growing too fast, but I think a big chunk of this money is ending up in matresses in the developing world and as cash in underground economies." This money is not being counted by the Fed system. In fact, if all the money supply increases went to these "sinks" then we would be seeing declining money growth not increasing. :^) Regarding the rest of your response, I concur that the Fed may opt to do nothing. I will not be surprised, however, if they raise rates a bit. THE MARKET may not take it too kindly as you said. That is why I'm net short. Its a real pickle for Alan and the Board. And they do not like being placed in a position of so few options. I have always believed markets move on unanticipated information and especially unanticipated money supply changes. IMHO a 50 bp move is too much, no action leaves unresolved inflation issues, loosening out-of-the-question for now, and 25 bps. an interesting possibility. If you put yourself in the Board's shoes it looks like a middle course, good for bonds and credibility, temporarily bad for stocks, and if stocks "go to hell" and result in a later recession a choice that was a justified, preemptive move that can be corrected. Keep in mind if a "crash" does happen, interest rates will have already moved lower, thereby assisting the Fed in accomodation. I do not see a 1929 scenario, but rather a healthy stock market correction of 10 to 25%. That move is not the end of the world given where valuations currently are. To rabid Bulls, it may seem like the end of the world I suppose. BWDIK. Good luck all.

To: Zeev Hed who wrote (7458)	11/8/1997 8:25:00 PM
From: Tommaso	Read Replies (1) \| Respond to of 18056

Actually the money supply growth slowed back down a little. M2 is not that much out of line with the last several years. There was a blip, but it's smoothed back down. I had thought that the fed would not touch interest rates, but the resiliency of the stock market might encourage a little leaning against the wind. I keep wondering why on earth they don't at least bump the margin rates up to 60%, or initiate some sort of investigation into excess supply of credit to the stock market. I remember feeling like a criminal in 1969 when I used a cheap bank loan to help buy a convertible bond. I really half felt that the feds would be down on me. Now someone can borrow $200,000 on a house that's appraised at $180,000 and has a $50,000 mortgage still outstanding on it, and put the whole thing into a mutual fund without anyone asking a pointed question.