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So you believe the repo auctions are intentionally short term to
address the day-to-day bank capital weaknesses, without a permanent
increase in the money supply?
Assuming they are happy with a contracting money supply, isn't that
inconsistent with the FOMC's inclination to reduce interest rates?
That would just cause inter-bank rates to decouple from the federal
funds rate.
What indicators will tell us how this is playing out -- unofficial M3?
From: Timothy Morge <timothymorge@xxxxxxxxxxxxx>
To: realtraders@xxxxxxxxxxxxxxx
Date: Tuesday, January 15, 2008, 6:46:29 PM
Subject: [RT] Inflation
I believe I cut my own reply off...long afternoon. Let
me try again...
Our current Fed Chairman spent more than 3 years
behind the scenes advertising himself for the job, so
when Greenspan decided 'the getting was good', he was
in the right place at the right time. And his main
selling point? Not since Paul Volcker [he claimed over
and over nehind the scenes] would the Fed Chairman be
as fiscally responsible as he would be, because he was
a staunch monetarist--just what we would need to fix
the coming crisis.
Now, don't send me messages saying I said he was Paul
Volcker reincarnated. HE said it, although Paul wasn't
strictly speaking a monetarist [but he did apply
monetarist medicineto cure the ills of hyper
inflation].
What does this bode for all of us? If you can believe
when the curren chairman says, he may be doing window
dressing, which is what the recent actions are, but in
point of fact, he will be letting the money supply
contract. There is only one way to go from 17 percent
inflation to something reasonable [2-4-6 percent] and
that is to shrink the outstanding broad money supply
and change prices.
Is it gonna hurt? You betcha. Will we see 2 or 3 large
money center banks fail? Most likely. Jail time for
some of these moron lenders? I hope so.
By the way, someone [to remain nameless] sent me a
wonderful book about the Austrian School Economist
Mises. It was a great read and really helped pass the
2 1/2 weeks I was in the hospital in December. I
heartily recommend the book if you like Economics or
just are interested in one of the most influencial
thinkers in the financial world in the 1900's...
Just my 2 cents, adjusted for current inflation.
I wish you all good trading.
Tim Morge
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