Year 2000, a presidential election year, is the traditional business cycle end point. The end point, generally, means reduced economical development. The cause was given to the monetary tightening from the private sector contributing to the politicians up to $1 billion. This year, the Feds also tightened with Fed funds rate and overnight discount rate. Fed funds borrowing are limited in nature because it is the need from banks which exceeded their bank reserve. It is very small compared to overnight discount borrowing. Over night discount borrowing is based on the deposit in the banks. It has a multiple which is how economy can be expanded by Feds lending out to the limit of bank reserves. This tightening, however, can be by passed by corporate profits. In a capitalist system, profit is the ultimate tool to expand economy. Wall street has been very good at pushing profits up. Technology advancement has provided the tools for continued profit accumulation.
Year 2000 target is continued economical expansion. In view of monetary tightening, jobs creation has to go back to the management of disposable income. Food cost will be redistributed. Clothing cost will be redistributed. Automobile cost will be redistributed. We have gone back to the 1992 economical model, which started the jobs creation.
So, the monetary tightening can thus be side tracked. Banks may suffer in the hands of the FEDS, but most other business will just be rolling along. Wall street will go back to building companies into profit centers. Next year, the unemploment will go down further. Feds will be amazed as usual.
The secret of building a new economy is now out. |
