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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Ramsey Su who wrote (6023)	8/30/1998 5:03:00 PM
From: Tommaso	Read Replies (2) \| Respond to of 9980

Greenspan is, in fact, in some sense allowed to trade. But bonds, not stocks. At any time the Fed is free to buy and sell U. S. bonds without any particular limit that I know of. If they have been buying for the past year (during which time the money supply increased rapidly, one result of such buying) they could sell now, a move that would take money out of the banking system and add to deflationary pressures. Selling normally would drive up interest rates by driving down the price of bonds, but with accelerating demand for the treasuries as a safe place to be, interest rates could actually decline even as the money supply starts to contract. The Fed may in fact have lost control for the time being. If I am confused about all this, no doubt someone will step forward to explain it all more clearly.