> 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?
>
> How do MM funds create money? You deposit $1,000, the fund buys
> commercial paper and CDs and T-bills. The issuers of those
> instruments either invest it in real activity or re-lend it to
> someone who might. Where's the ex nihilo part?
>
You deposit a $1,000, the MM loans it, via Fannie Mae and, say, a home equity loan, to a homeowner; the homeowner deposits the money on an MM, maybe the same as yours. Now both of you think you have $1,000 in ready cash. Same as a bank, except without reserve requirements.The key issue is what people consider "as good as cash on your hand". Most people do not think that way of a T-bond or a CD or even a 30-day commercial bill, but they do think that way of an MM account.
Do you see any fallacies in the above?
>
> Doug
-- 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