> Enrique Diaz-Alvarez wrote:
>
> >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.
>
> You may think you have $1,000 in ready cash, but if you write a check
> on it, the MMMF has to sell some assets or draw on a fresh cash
> inflow. Even credit money is limited in its ability to be two places
> at the same time.
Same as a bank, right? Except that the MMMF doesn't have to keep reserves around.
-- 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