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Technology Stocks : All About Sun Microsystems -- Ignore unavailable to you. Want to Upgrade?

To: Charles Tutt who wrote (17508)	7/1/1999 12:25:00 AM
From: Jon Tara	Read Replies (2) \| Respond to of 64865

Charles - WSJ editorial - the argument was made that the Fed should NOT raise rates, as that would risk deflation. They argued that it IS different this time - that the Fed is simply making a guess that more than 2% proditivity growth is not sustainable. The editorial suggested that efficiencies due to technology can sustain prodctivity growths higher than 2%. They cited AMZN (don't laugh!) as an example. AMZN has per-employee sales several times that of Barnes and Noble, while at the same time, several lower-proditivity booksellers have gone out of business. AMZN has had a 45% yearly prodictivity growth. "natural selection" will force whole industries into more productive modes, once it's been shown that such prodictivity is possible. (They certainly weren't suggesting a sustainable proditivity growth of 45%, but still they suggested that something higher than 2% on average is not unreasonable to expect, given that the average is likely to be dragged-up by stories such as AMZN's.) Indeed, the Fed cited a watered-down verison of this argument in their decision to change their bias toward neutral. The editorial also debunked the "wealth effect" argument, stating the obvious that for everybody using market gains to buy stuff (supposedly causing inflation), there is somebody else on the other side of the closing trade, who is buying the stock while refraining from buying 'stuff', offsetting the inflationary effect.