Why the new economy is micro (companies well managed) and optimum interest rate give us the supply side growth?
Japan made the bad decision to make interest rates too low. US interest rates went down to meet them in 1992-1993. We soon found out that interest rate from bonds; should be not to expensive but enough for investors to compound the gains each year to reinvest later. The pain of Wall street losing money in 1994, was the painful realignment of proper amount of interest gains to propel the economy. 6.5% gain in interest income each year to gain 3.5% in the overall economy. In the last few years, we could have done a very good job if no interest rate change at all.
Liquidity to provide the economical growth, now controls the productivity and individual company growth. Feds do use M1, M2, and M3 data to adjust bank reserve criteria. Coupons may be passed out. Treasury bonds may be auctioned and timely siphon out the surplus liquidity. Tools are adequate, so far. However, inflation is controlled by providing the liquidity to produce ample supplies beyond demand.
Microeconomy of well managed companies, created jobs. Further improvement in productivity releases surplus man power to rotate into another industry. Central planning is improving industry by industry. And anticipate the social security crowd to join the labour force just to take up idle time. Hence, a balanced economy, jobs for every one if they want one. Market basket in Ashland, Ma. hired 340 employees in 1996, 280 in 1997; now they hire 225. Some retired is still hired there. |
