The Federal Reserve is being driven to distraction by Y2K.

Even as the Central Bank has been publicly tightening monetary conditions through three interest rate hikes this year, it has been quietly pumping money galore just in case the Millennium madness being predicted actually does happen.

Michael Belkin, a Fed expert who writes the Belkin Report, says Alan Greenspan has allowed $70 billion in cash to flood the U.S. monetary system in recent weeks and has created something called a "repo option." These options could leave the monetary system awash in another $426 billion in additional emergency cash in the next few weeks.

"This all adds up to the biggest Fed credit expansion ever. This monetary boost is wildly stimulative for the U.S. equity market in the short term," Belkin says, "but will leave equities painfully vulnerable to a crash once the Y2K-related credit expansion is withdrawn in the new year."

... cont'd at ...

Link

-- John (jh@NotReal.ca), December 03, 1999

Answers

Thanks for the post John. I think ol al knows what's around the bend. So why stop the party "before" the lights go out

-- kevin (innxxs@yahoo.com), December 03, 1999.

Treating the symptoms instead of the disease!

-- snooze button (alarmclock_2000@yahoo.com), December 03, 1999.

They should be afraid, be VERY afraid.

Expect stagflation, but prepare for depression.

-- nothere nothere (notherethere@hotmail.com), December 03, 1999.

Like I said here a month ago: 12,000 before Jan 1!!!

*sigh*

Jolly

-- Jollyprez (jolly@prez.com), December 03, 1999.

It's not always the drinking that hurts but the hangover the day after.

-- squid (Itsdark@dsown.here), December 03, 1999.

More from the last section of that article:

...The bond market would normally rally if it thought the Fed was being diligent in fighting inflation. And that's precisely the message that the three rate hikes should have conveyed.

But bonds have, instead, been very weak despite the Fed's supposed nastiness and rates have risen beyond where the Fed intended.

And that is leading many to believe that investors worldwide are wise to the Fed's Santa Claus ruse.

That's also why the U.S. dollar has been so weak. And why, traders say, the Fed was forced to rig the bond market last week with massive purchases of all maturities of government securities.

The prognosis? The stock market should have a very easy time between now and year's end -- even easier than I first thought.

But there could be trouble later when word gets around about the Fed's dirty little secret -- so don't go spreading this around.

-- faith'nhope (y2kaos@home.com), December 03, 1999.

Here's an excellent article by Larry Kudlow at

http://www.cnbc.com/commentary/commentary_full_story_Mar kets.asp?StoryID=9765

CNBC.com Chief Economist Lawrence Kudlow outlines the steps the Fed has taken to ensure the new year comes without major Y2K problems. In advance of any possible Y2K-related cash and liquidity threats, Alan Greenspan & Co. are exercising their central bank prerogative to provide the nation with an elastic currency. Since September the Fed has quietly negotiated a series of repurchase transactions designed to inject a massive volume of bank reserve liquidity into the U.S. financial system. Call it a cash insurance policy to underwrite potential Y2K financial emergencies. At last count the Fed has injected roughly $46 billion of cash through so-called "tri-party repurchase agreements" arranged with third-party custodial banks. This is over and beyond the Fed's normal repurchase program for their own System Account or for customer purposes...

-- Clyde (clydeblalock@hotmail.com), December 04, 1999.

Greenspan the "Repo Man"!!

It's easy to lend out money, the hard part is getting it back. When that crazy sonfabitch finally resigns he is going to leave one hell of a nightmare for the next guy that gets that job.

-- Hawk (flyin@high.again), December 04, 1999.