> 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.
Not sure about that. Rent/mortgage payments, most new car payments, and credit card payments may weel make up most consumer transactions by value. PLus, I am not sure how common the $250 limit is - many MM give you ATM access to your money. And the direction is clearly towards less differences between MMs and checking accounts, not more.
> 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.
Monitoring is not the issue. They already monitor M3, which includes MM balances. The issue is control - if MMs create money, then the main Fed tool for monetary control is on the process of disappearing. They may monitor the debt orgy, but they are (or soon will be) powerless to stop it.
> 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.
It depends on what people *regard* as ready, no risk money. I don't think stocks have gotten to that point *yet*.
> Michael Pollak................New York City..............mpollak at panix.com
-- Enrique Diaz-Alvarez Office # (607) 255 5034 Electrical Engineering Home # (607) 272 4808 112 Phillips Hall Fax # (607) 255 4565 Cornell University mailto:enrique at ee.cornell.edu Ithaca, NY 14853 http://peta.ee.cornell.edu/~enrique