Money creation

Tom Lehman TLehman at
Sat Apr 8 17:57:21 PDT 2000

Dan Davies mentioned this money market fund business about 10 days ago. It's probably all in how you define a money market fund. For example many S&L's have what they call money market funds although they are insured up to the 100k dollars by the government, some banks do to. On the other hand there are un-insured bank and brokerage money market funds.

Something fishy is going on.


Enrique Diaz-Alvarez wrote:

> Doug Noland makes a good argument that money market funds have become
> money creators not subject to reserve requirements. The crux of the
> argument is that people regard money market investments as both
> stores of value and media of exchange, just like checking accounts.
> Deposits on money markets can then be re-lent without keeping reserves,
> and as long as borrowers deposit them on other money market accounts,
> the multiplier is, in principle, infinite.
> A counter argument by Paul Kasriel
> If Noland is right, and his argument does sound more persuasive, the Fed
> has effectively lost control over the US financial system. The
> Bubblemeister could not keep consumers from going into hock to buy SUVs
> and internet stocks even if he wanted to. This may explain his bizarre
> refusal to comment on debt levels. Comments?
> Enrique
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