> 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.
Yeah, plus the fact that the main Fed tool for controlling money and credit is or will be increasingly nullified by this alternative banking system, as MMMFs account for an increasing fraction of what people think of as money. In a sense, we are back to 19th century wildcat banking days -easy credit, everything hunky-dory until an appreciable fraction of people begin to harbor doubts as to whether MMMFs are really as good as cash.
> 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.
Again, no more predictions from this corner. But that crisis appears as a distinct possibility.
-- 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