Fed playing Jenga with the markets?

Discussion in 'Economics' started by EqtTrdr, Dec 18, 2006.

  1. Kinda makes ya wonder about a few things, huh.
  2. Daal


    What this conspiracy theorist fail to realize is that the fed has very little control of M3, which is one of the main reasons they dont publish anymore.

    Plus his analisys of the VIX is not good. M3 increasing or decreasing can't alter human nature, the market can go for long periods of irrationality. Heck, just look what people eat in america and tell me that a market composed of those people can be any rational
  3. WTF are you talking about? Hello, Open Market Operations, you can look up on a regular basis just how little control the Fed has over M3.
  4. Daal


    If you withdraw money from a checking account you will contract the money supply significantly due fractional reserve banking. The fed cant prevent you from doing that. If banks for whatever reason decide to call out their loans the same thing happens
  5. daal, please do some more research.

    The reserve requirement on demand deposits has been effectively 0% for a few years now: http://www.federalreserve.gov/monetarypolicy/reservereq.htm

    Even if your assumption that withdrawing money has a multiplier effect on decreasing the overall money supply, if someone withdraws money from their checking account, it is spent and deposited in another checking account. So are you saying velocity is decreasing?

    The Fed has an unlimited capacity to print money (ie. buy securities with digits created in a computer). They are only limited by how aware the public is that their money is being counterfeited.

    Be careful of the Fed and the "solutions" those same people will offer upon the collapse of the Fed and the dollar.

    The Amero will be another scam with a different name. Hopefully our society will become aware enough to say no. I hope.
  6. Daal


    That means banks have MOST control of m3.
    They can decide how much they will expand credit.
    What the fed can do is to control the monetary base.
    Do you think its a coincidence that the vix is at all time lows, people are quitting their jobs and living off high leverage 'carry trades'(just look at oanda forum) and long term yields are down?People are understimating risk, banks are too. The will be soon be punished by the market
  7. Joma


    Underestimating risk - let me quote two heavy-weight sources :

    1) German Bundesbank´s Weber :




    2) Abby Cohen ( Goldman Sachs Chief Invesment Strategiest )


    Althogh Mrs Cohen is notoriously long the markets when they effectively are about to plummet is worth another discussin, but there is one very important issue in this interview :
    "We are somewhat concerned, for example, about corporate bonds and I think that the best values currently are indeed in the public equity market."

    So, watch out for the credit derivatives premiums to raise and you will know when the imablance will start to occur, i.e. a possible correction in the stock markets.