Money creation

Michael Pollak mpollak at panix.com
Sun Apr 9 20:18:41 PDT 2000


On Sun, 9 Apr 2000, Enrique Diaz-Alvarez wrote:
> In any case, it seems to me that the difference between creating money and
> creating money in $250 increments only is a fairly minor detail, don't you
> think?

Well no, but of course I could be wrong. It seems to involve two important points. One is that the money isn't immediately available for most purposes, since most purposes involve purchases of less. Because of that, people have to wait until the check clears in their checking account before it will flow like money out of their ATM and debit card. But even if we discount that (many people's banks will clear their checks immediately), the more important fact to me is that this limit forces most of the money to flow through people's checking accounts, if only momentarily. So that if the Fed is using changes in average checking account balances to monitor money usage, their data is still good.

Of course, if all this strikes you as trivial, why stop at money market funds? You can write checks like this on mutual funds or bonds funds just as easily.

Michael

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



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