Conference nyoss1::market_investing

    i don't know if it's a right or an obligation...ultimately it's the 
    the currancy markets and the Treasury that dictate what happens.  
    
    The Treasury are the ones who really are concerned about balancing what's 
    coming in (Revenue) with what's going out (Interest payments).  They
    control the money supply but the Feds control the value of that supply.
    Anyone know what M1 has been doing for the past two years...seems to me
    with interest rates so low that the money supply must have grown a fair
    amount????
    
    You can't jack up interest rates too high or the government gets hurt
    (big deficit) and if you drop them too low then the currancy takes a 
    hit on the open market (which we're seeing now with the strong Yen and
    Deutchmark)...visa versa, you can't open up the money supply without
    interest rates taking a dive and tightening it will only drive up
    rates.  
    
    i think it ends up being a fine line game that's played out between the
    Treasury and the Feds...trying to respond to market reactions while
    maintaining one eye on each other and the operation of the government.
    
    Doug 
    
    

.0> The question that I have is, who the H$ll gives the Fed. the right to 
.0> manipulate (screw-up) the economy the way in which they do...?!?!?!
    
    First the earth cooled, then America was discovered, then in the late
    1800s farmers began having a _really_ hard time as prices kept falling
    and many went bankrupt. A populist movement began in 1877, determined
    to do something about the ever-declining money supply. The end result
    of all this was the creation of the FED as an independent body
    chartered to keep this sort of tragedy from repeating. You can judge
    their success for yourself. Be sure to base your judgement on
    realistic alternatives, not some utopian ideal.
    
.1> i don't know if it's a right or an obligation...ultimately it's the 
.1> the currancy markets and the Treasury that dictate what happens.  
   
    Ultimately it's the markets. Period.
    
.1> The Treasury are the ones who really are concerned about balancing what's 
.1> coming in (Revenue) with what's going out (Interest payments).  They
.1> control the money supply but the Feds control the value of that supply.
    
    Where comes this notion that the Treasury has any role in all this?
    Basically Treasury is a glorified bookkeeper with little real power.
    Oh, they can buy and sell a bit of currency, but just like you and me
    their pockets are limited. Daily FX transactions come to over US$1.2
    Trillion; I have only seen Treasury actions in the $50 Million range,
    and those are rare.
    
    Treasury most certainly does Not control the money supply, nor does the
    Fed control the "value". Twice a year Greenspan goes to Congress to
    explain what the current money supply figures are and what his "targets"
    are for the next year. But ultimately the money supply is a function of
    millions of individual borrowing decisions over which nobody has total
    control. The Fed tries to influence more or less borrowing, depending
    on targets, but that leads to the next problem:
    
    The value of the currency. Like anything else, value is a function
    of what others are willing to pay. Nobody controls the value of the $.
    The REAL problem is that supply and value are DEpendent variables.
    Try to peg the supply and the market will adjust the value; try to
    fix the value and the supply will necessarily run all over the place
    as the Fed would be forced to radically buy and/or sell huge amounts to
    stabilize the value. In September 1992 Great Britain ran square into
    that problem trying to prop up the Pound against the DMark. The end
    result was the destruction of ERM I. There is no reason to believe the
    U.S. could do any better than Great Britain in a similar situation.
    
      John

    
    >> who the H$ll gives the Fed. the right...
    
    Congress does.  In principle the Fed is independent, but it must
    report to Congress every 6 months to explain what it's doing, what it's
    targets are, and why it's smart to do that rather than something else
    that might make the Congressman's voters happier.  The FED exists as
    long as Congress permits it to exist, so it's not a politically
    independent body.  On the other hand, imagine the horror of having
    Congress itself trying to micro-control the economy!  At least the FED
    has _some_ independence to pursue a path that may be politically
    incorrect but economically wise (e.g. the political demise of Jimmy Carter
    can probably be blamed on the FED's resolve to limit the money
    supply and tackle inflation...  and that gives you another clue why
    Congress takes such a strong and continuing interest in whatever the
    FED says or does).                                  

    The FED chairman is appointed by the president to a six year term.
    The idea is that any president could not apply his political will
    to change FED policy because the FED chairman cannot be removed by a
    president, and the term of the FED chairman overlaps that of the
    president.
    
    I agree that Paul Voelker was an excellent FED chairman, and that his 
    policies, while supported by Carter, did lead to Carters defeat for
    re-election.