The new economy and interest rate.
As our new economy slowly matures, yearly planning goto 2 year, 5 year, 10 year, 50 year and 100 year projections. Each year is a one year planning cycle, but in every cycle more detailed planning must include 100 year plans. For instance, lumber starts with planting of trees that must have land alocated for planting, to harvest 100 years later.
While economy is based on population, and job growth; the real economy on the demand side ia based on the individual businesses being managed well and maintaining employment as well as creating job growth. Today, we are phasing in the computer technology such as "help desk" to manage business better for more efficiency and productivity.
Old economist still crying about using interest rate to control economy. No matter how you look at interest rate, steady interest rate is always easier for every manager to manage the business. If FEDs start to change interest rates, all hell will break loose on businesses. Who can manage their business when all of a sudden, they have to pay the banks more money each year. When we lower interest rate, we still have to raise them later; creating business cycles we call "boom and bust". Steady interest rate is a must for steady economical growth.
On the other hand, monetary policy must be used to accommodate the growth of economy. And tighten the liquidity when surplus may create excess inflation. Most people tend to look at inflation as change in price; but the true inflation is a change in standard of living. When we all drive Rolls Royce rather than Hundai; you know inflation is here. And here to stay.
People some times still don't understand hiking interest rate itself creates inflation. So, when people tell you they are fighting inflation by increasing the interest rate; who are they trying to fool. US or themselves? |
