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How does the FRBNY January announcement to significantly expand the number of dealers money market funds as reverse repo counterparties factor into the equation to drain reserves from banking system ? http://www.newyorkfed.org/markets/expanded_counterparties.html#allmembers http://www.newyorkfed.org/markets/rrp_doc_forms.html When the Fed seeks to reduce its balance sheet by perhaps 1 trillion dollars shifting its' assets to reverse-repo dealers funds, will this shift reduce banking reserves or just shift and hide the peas under other shells ? http://www.newyorkfed.org/markets/expanded_counterparties.html#allmembers and http://www.newyorkfed.org/markets/opolicy/operating_policy_110323.html It seems that all these assets now held by FRBNY must be held by someone, that they will not somehow disappear prior to maturity, but rather be reformulated and repackaged into money market fund assets. Will this shift alter markets expectations of inflation --dollar debasement, by reducing quantity of reserves in traditional banking system and thereby quelling markets’ anticipations of potential inflation and increased velocity-- money supply circulation, or will inflation expectations remain elevated as evidenced by silver, gold and commodities anticipating money printing to monetize federal debt ?
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Apr 11, 2011