On Tue, 11 Apr 2000, Enrique Diaz-Alvarez wrote:
> Michael, Doug, Kasriel sort of appears to concede Noland's point.
Okay, Enrique, just one thing to clarify. Let's say I accept that MMF's operate just like banks, and that they multiply money just like banks, because every asset purchased puts money in another MMF and supports another asset purchase. So let's say I accept that this is a parallel banking system that is unsupervised and uninsured. I still have trouble with this idea of infinite money creation. Even if the MMF's are not required to have reserves of a certain level, aren't reserves of some size still required by the exigencies of business? To cover the daily withdrawals on a slow day of deposits? Maybe they won't be as high, maybe they'll be criminally low, but still. If they're only 2%, the money multiplier would be 50, not infinity. No? And that would be in a world that didn't have any banks. The real world would be a blend of the bank multiplier and this the MMF multiplier.
Michael __________________________________________________________________________ Michael Pollak................New York City..............mpollak at panix.com