Money creation

[Brad De Long]

>Enrique Diaz-Alvarez wrote:
>
>>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.
>
>You really think that, say, another point or two rise in the fed 
>funds rate would be powerless to stop the debt orgy? You think the 
>rate rise of the last year has nothing to do with the rout in tech 
>stocks?
>
>Doug

Over the past year, news about interest rates--at least as our 
computers using linear projections as proxies for expectations define 
news--has no effect on tech stocks. Our models that say that tech 
stock valuations should be extremely sensitive to interest rate news 
and movements worked fine up until March of 1999, and then broke 
down...

Brad DeLong