On Mon, 10 Apr 2000, Enrique Diaz-Alvarez wrote:
> Doug Henwood wrote:
>
> > 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.
I'm out of my league here, but I think Doug is saying No. A bank creates new assets by loaning money, and if reserves are 10%, it creates 90 cents worth for every dollar deposited. But a MM acccount doesn't create assets. It simply buys and sells created ones.
Michael
__________________________________________________________________________ Michael Pollak................New York City..............mpollak at panix.com