Hussman Market Commentary: Independent Thought

Hussman Funds - Weekly Market Comment: July 24, 2006 - Independent Thought: "It continues to astonish me how much power investors appear to ascribe to the Federal Reserve. The institution can do nothing but purchase debt (mainly U.S. Treasuries) and pay for it by creating bank reserves, or sell debt and receive payment by reducing bank reserves. When you realize that the total volume of bank lending has virtually no link at all to bank reserves (since the majority of monetary aggregates other than checking accounts have had zero reserve requirements since the early 1990's), and that foreign purchases of U.S. Treasuries have swamped Fed activity in Treasuries three-to-six times over in recent years, this whole focus on every word, syllable, and inflection from the Federal Reserve is just preposterous."