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Strategies & Market Trends : ahhaha's ahs

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To: ahhaha who wrote (1012)	2/13/2001 1:40:54 PM
From: ahhaha	Read Replies (1) of 24758

Greenspan's economy has always relied on productivity. He just stated that in the last six months productivity hasn't fallen to the extent that it has in similar quasi slowing or recessionary periods. He and they are looking backwards. Productivity measures are impacted linearly while productivity itself is impacted non-linearly by the encroach of unit labor costs. Wage gains in both service and manufacturing sectors are persisting in spite of a slowing of output and an increase of unemployment as evidenced by the Richmond District's results. Those gains contribute to the non-linear reality and so Greenspan's economy can't be expected to advance without notable inflationary pressures. Greenspan testified today that: The central tendency of their(the members of the Board of Governors and the Reserve Bank presidents) forecasts for inflation, as measured by the prices for personal consumption expenditures, suggests an abatement to 1-3/4 to 2-1/4 percent over this year from 2-1/2 percent over 2000. If the Richmond District data is representative, and there is no reason why it shouldn't be since it has reliably been a good standard in the past, then this forecast by the Board can't be accurate. The Board knows this is true and so today they defended the other side of the posted fed funds rate by engaging in massive matched sales. Yesterday they did a strong coupon pass, so the strategy has been moved to putting a squeeze on the expectations of bankers who use the RP free float to support speculative financial activity, to an encouragement of real economic activity. This is accomplished by injecting non-contingent reserves into the system. Non-contingent reserves can't be factored into fungable financial vehicles as easily as contingent ones. It is as though a banker can't use contingent money in long term projects because it might disappear, but they can use contingent money to support speculation in quickly transactionable financial vehicles. This mix change is designed to suppress stock market speculation that arises from excess money creation at the margin from fixing policies and designed to encourage movement of speculation money into real economy. The problem is that stimulus of real economy stimulates wage demands more than it stimulates output. There wasn't enough "hard times" to put the wage genie back in the bottle.

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