MOre boring crap on money creation

DANIEL.DAVIES at flemings.com DANIEL.DAVIES at flemings.com
Tue Apr 11 11:23:22 PDT 2000



>Enrique Diaz-Alvarez wrote:


>>Michael, Doug, Kasriel sort of appears to concede Noland's point.


>About credit risk, yes. Not about their immunity to Fed tightening.
>In fact, the kinds of anomalous interest rate spreads Noland talks
>about - expanding risk premiums, for example, of the sort that did in
>LTCM - are more likely to occur when the Fed is in a hostile mode.
>When the Fed is easy, investors get mellow about risk; when it's
>tight, they get nervous.


>Doug

I think there are cross purposes here. I never read Enrique as saying that the MMMFs were immune to a Fed tightening; I thought he was saying that the MMMFs were a secondary, uninsured banking system, and that money and credit figures which didn't take account of this sector were therefore flawed. Given E D-A's form as a crashophile, it seems more natural for him to be postulating a theory under which exactly what you say happens -- that the Fed tightens, spreads widen, the MMMFs go south and America has what amounts to a banking crisis? Although this is my own pet theory, so I may be projecting.

"This deal is not about expense synergies, it's not about layoffs. We do no expect material layoffs as a result of this deal"

--Bill Harrison, Chase Manhattan at the press conference on the takeover of Flemings.

"They've got strength in asset management, strength in Asia. In Europe we may need to do another deal"

--Ibid.

talk about mixed messages . . . . .

d^2

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