[Zygote]

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how does the action those who engage in repos, as a result of that engagement affect the real economy?

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When the fed perpetually buys mortgage back securities with repos this props up the housing market and effects the real economy. Who knows what other type of securities the fed will license themselves to purchase as well.

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the point is that the effect is so small as to totally distort anything M3 can give you. you said it imo..."...must have a long run effect on the money supply at least in a marginal way"


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I agree the result is tiny when you consider the money supply effects of repos in general, but those points were still worth making clear. There are small effects from Eurodollar accounts too, to the extent that the arent used as credit transactions, that will effect the money supply, but on whole i dont think anyone's making a big mistake discounting this in todays shaped world, but the academic mistake is important.

I still stand by the fact that the type of securities the fed is purchasing can have a large effect on the economy, however.