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To: Sarmad Y. Hermiz who wrote (39985)	2/14/1999 12:39:00 AM
From: Bill Harmond	Read Replies (5) \| Respond to of 164684

Sarmad, The Fed uses open market operations. They increase the money supply by buying treasury bills in the open market thereby putting more dollars into circulation, and they decrease the money supply by selling them and taking the cash back in.

To: Sarmad Y. Hermiz who wrote (39985)	2/14/1999 12:46:00 AM
From: GST	Read Replies (1) \| Respond to of 164684

Sarmad-- interest rates give you a good sense of direction. Why lower rates if you are not prepared to crank up the money supply? The supply of money is controlled largely by manipulating bank reserves so they can extend credit. If banks have more money the market reprices credit terms down. 'Offical' rates are largely symbolic. In the 'old' days the fed left it to the market to figure out what it decided by watching market transactions after their meetings. With official Japanese rates near zero, and nobody borrowing and the economy shrinking by 2 percent, this is now meaningless -- the liquidity needed to crank up the system is enough to blow your mind -- the alternative? Radical economic surgery. Don't hold your breath.