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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host
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To: Justa Werkenstiff who wrote (5460)6/10/1998 9:20:00 PM
From: Justa Werkenstiff  Read Replies (2) of 42834
 
All: I have been following Greenspan's testimony for quite a few years now and I have noticed a shift in policy. Back during 1994 and the series of tightening moves during that year, the policy was one of preemptive tightening based on a fear on inflation. It was thought that interest rate tightening had a time lag of about nine months or so and so Greenspan wanted to make his move before inflation got a "toe-hold" in the economy. But since then, Greenspan learned (as we all have) of the productivity improvements in the economy that have counterbalanced any inflationary pressures we may have seen in past business cycles. Now the events of SEA have apparently further increased the Greenspan's reluctancy to tighten. I think this Greenspan quote is quite telling: "At this point, at least, the adverse wage-price interactions that played so central a role in pushing inflation higher in many past business expansions -- eventually bringing those expansions to an end -- do not appear to have gained a significant toe-hold in the current expansion." Now Greenspan appears to be saying that he will not tighten until he actually sees inflation. Preemption appears to be out at least for now. How significant does inflation have to be now in order to tighten? Is this a temporary policy based upon current events in SEA? Thoughts to ponder.
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