Did Luc make a quick jaunt over to Houston? -g-
(from Doug Noland's latest)
<<< This question came at the end of recent McTeer speech in Houston, on “The Role of Technology in the U.S. Economy.”
“The question I have for you as a member of the Federal Reserve and all
the Federal Reserve Governors is simply this: In the New Economy, I
will use Microsoft as an example, companies are more dependent on
intellectual capital as opposed to financial capital, unlike an Old Economy
company like Exxon, where they obviously need a lot of intellectual
capital too, but financial capital is the constraint. The question is, though,
as the economy evolves into the New Economy and financial capital
seems to be less important – companies are using just in time inventory,
managing working capital needs better, so on and so forth. Why is it that
we seem to have excessive credit growth? Why is it in a 6 or 7 percent
nominal GNP economy M3 consistently grows 10 to 12% a year. Why is
it the two largest government sponsored enterprises, for instance Fannie
Mae and Freddie Mac are exploding their balance sheets. Why is it that
the Federal Reserve, at the hint of any crisis, ‘97, ‘98, Russian defaults,
Long Term Capital Management, Y2K, the Federal Reserve explodes its
own balance sheet to facilitate another of explosion of credit in the
economy. It seems like to me there is a disconnect because the economy
seems to require a lot of financial capital to continue to grow. It seems
the New Economy paradigm would argue that financial capital would be
used ever more efficiently and require less credit on the part of the
Nation’s central bank.” >>> |
