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Politics : Ask Michael Burke
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To: yard_man who wrote (48416)2/23/1999 4:40:00 PM
From: BGR  Read Replies (2) of 132070
 
tippet,

Asset prices should not be the Fed's consideration (and it isn't) and the high levels of consumption in the booming economy is yet non-inflationary! This, of course, has confounded everybody and I do not want to act like an over confident ass by claiming to know exactly the underlying reason. But, perhaps technological progresses has put sufficient deflationary pressures on the economy and the recession in the several parts of the rest of the world has helped.

If there is a large setback in asset prices it will definitely affect consumption which in turn will slow down the economy. If that is undesirable, it is even more reason for the Fed to not raise taxes (which may cause large setbacks in asset prices) if the economy doesn't independently need to be slowed down.

Japan's problem, ironically, is it's phenomenal savings rate and low consumption which is where the US will head if rates are raised.

-BGR.
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