Money creation

Michael Pollak mpollak at
Sat Apr 8 22:51:19 PDT 2000

On Sat, 8 Apr 2000, 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.

I dunno, Enrique, maybe I just have a crappy money market fund, but the checks I write on it are only good over $250. Since I don't buy many things that cost that much (and when I do, I use a card), these checks are checks in name only. They are actually just a means of transferring funds from my money market fund to my checking account. So the money market fund seem to be functioning just like a classical bond in the Hicks/Keynes set-up. Except that where they thought of checking accounts as paying no interest and bonds as paying some, now we have checking accounts that pay interest and money market funds that pay more. In my money market fund, it's gathering (more) interest, and in my checking account, it's money. If things change so that I spend more more, you can still see the change clearly in my checking account.


__________________________________________________________________________ Michael Pollak................New York City..............mpollak at

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