Chip,
Thanks for posting the text of AG's talk. He keeps giving the same speech over and over, but with some differences and elaborations. This one seemed to me to be better than the previous ones, in that he showed a more specific appreciation of some of the factors that are indeed "new", notably the increasing flexibility of labor in the US and the effects of better information and methods of distribution on eliminating redunant non-productive labor. Of course he still needs (rightfully so, IMO) his OTOH/ONTH comments, like:
<<On the one hand, the evidence of dramatic nnovations-- veritable shifts in the tectonic plates of technology--has moved far beyond mere conjecture. On the other, these extraordinary achievements continue to be bedeviled by concerns that the so-called New Economy is spurring imbalances that at some point will abruptly adjust, bringing the economic expansion, its euphoria, and wealth creation to a debilitating halt.>>
My questions to the thread for discussion are this:
(1) Is it your opinion that the Fed needs to raise rates in order to prevent these "imbalances" from bringing ongoing "wealth creation to a dibilitating half", or can we depend on the business cycle--especially given the increased flow of accurate inventory/demand information, faster manufacturing and delivery processes, and greater labor flexibility--to do it w/o the help of the Fed? (Forget about what the Fed thinks, they pretty obviously believe that they have to do something.)
(2) Even if you believe that the economy will always get punch drunk on growth without the influence of the Fed (or the government in one way or another) do you think that raising rates is the best method for dealing with the current situation? I have in mind here my own belief that raising margin rates would be a much method of affecting equity capital than raising rates. By reducing leverage in the capital markets, you would make it more expensive to fund ventures w/o economic justification without hurting the currently producing economy as much, and would help to deflate the equity bubble that exists.
Anyone interested in talking about this?
s. |
