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Pastimes : The Naked Truth - Big Kahuna a Myth -- Ignore unavailable to you. Want to Upgrade?

To: NickSE who wrote (50530)	7/1/1999 10:29:00 PM
From: Terry Whitman	Read Replies (1) \| Respond to of 86076

Next Chapter? Hell, I think I'll just plagerize this guy. <g> >What has brought about this change in expectations? Conditions are being put in place for the entrenchment of inflation. For the last 1 1/2 years the FED and the circus of world economy has unwittingly engineered these conditions and now the combined effects are about to hatch. It is amazing since they have gone to the ultimate degree in looking for the source of the problem. None of them know. I'll state for the nth thousandth time that the problem lies in what Von Hayek called the pretense to knowledge. That means that FED believes they know where the proper rate of interest on loanable funds should be set and they interfere with the free market mechanism by continuing interventionist policy. This isn't necessary if you let the market determine the cost of money and practice maintaining the growth of money commensurate to the rate of potential output. The FED can do the latter with great error and the interest rate market will hardly be effected. There would be pretense there, but the outcome of bungling action is infinitesimal. Interest rate volatility would be remarkably benign, certainly far less than what the experts cook up at the FOMC under a regime of interest rate management policy. Now we have the cycle back. The pain of the last 20 years has been squandered. That means FED raises rates and sits until inefficiency in output causes the effective return on created money to be less than the value add of labor and machinery. This is the embedding process. In this process the cost of funds doesn't commensurately cool demand for them. The inefficiency factor adjudicates the differential. The result is that both higher and lower incremental output is more expensive and has to be afforded by raising prices. The price increases are small enough to be accepted by a wealthy thinking public. The job of the FED eventually will be to break this sentiment by Draconian interest rate increases. They will be Draconian because they are effectively erring on the side of ease. They don't know what is easy or what isn't, so they err on the side of what the people want: more prosperity.< One guess to who wrote it. I can't believe he writes this stuff for free.