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Patrick: I would like to take issue with the post of yours wherein you examined the relationship with the CPI and Fed Funds rates. While it is true that the difference was much smaller in the earlier 90's, the fact is that a difference of three to four points is not out of line with historical standards. Moreover, having the fed Funds rate tied to the CPI is goofy(read that Keynesian), because that is like the tail wagging the dog. The entire purpose of the Fed Funds rate is to control the CPI (read that Milton Friedman).
And as a Barrons article pointed out this weekend, it is precisely the monetarist policies instituted by Mr. Volcker that is primarily responsible for the great bull market of the past 17 years. Not to disparage Mr. Reagan (one of the two great Presidents this century), but Paul Volcker was the real deal, the real tough guy who was one hundred percent pure testosterone
Which reminds me of a college professor I had at NU--a very very arrogant truly soft head liberal named Karl DeSchweinitz Jr. (as opposed to his father Kark DeSchweinitz Sr. who was the father of modern American social work education). Karl gave me a C+ on a paper in his "Comparative Economic Systems Class (read glorify Communist systems), because I wrote that countries in Eastern Europe were examples of economies that failed to proceed through Marx's dialetic that required an economy to have a fully functional capitalistic system before it was "ripe" for a communistic system. Thus, I argued that even by Karl Marx's standards, communism would fail, and that countires such as Russia and Poland would eventually embrace capitalism.
Clearly I had written an "A" paper, and I went to complain to him about the "C" grade. His response was "I would expect just such a response from the only student on campus who wears dress shoes to campus."
Well, about three years ago, I ran into Karl at our local Dominicks with my Polish wife in tow, (whose late father spent seven years in prison after WWII, courtesy of the communists and whose greatest pleasure was listening to Radio Free Europe on his lunch break, and whose own father [a Jew by Nazi standards] was marched out to the woods and shot in the first hours of the Polish invasion).
As God is my judge, I spotted him in the produce section in the beginning part of the store, rushed home and dug out his paper and returned to confront him with my prediction. I really didn't give a damn if he was in his eighties and somewhat frail. Although, I was polite, I excoriated him for his lifelong misplaced humanity that supported a system that destroyed the lives and very souls of millions and his inability to even remotely break away from his father.
He was momentarily nonplussed to say the least, but the essence of his reply was interesting. And that was, "It's not over until it's over--we may very well live in a society where there are far more central controls much more akin to communisim."
And while that is food for though on a Monday morning, my feeling is that the central controls that work best is what has worked best in this country for over two hundred years—the rule of law dedicated to the proposition that all men and women are created equal.
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