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To: Chuzzlewit who wrote (138187)	7/31/1999 3:06:00 PM
From: JRI	Read Replies (1) \| Respond to of 176387

OT I'm in total agreement with all your posted. Real interest rates are too high. Inflation is not a problem. Major tax relief is not needed. The wealthy is our country have benefited enormously from the last decade; the least among us much less so. Any tax relief should be focused on the least among us benefiting, and, as an addition, to get rid of the (dumb) marraige penalty....And for gosh sakes, let's pay off our national credit card, and use debt ONLY as a weapon to bail us out of major recessions and, God forbid, support us in war...no other policy can be considered in the least way responsible... There is nothing more dangerous to national security than having millions of foreignors holding our debt, and, subsequently holding the country (in economic terms) hostage...

To: Chuzzlewit who wrote (138187)	7/31/1999 7:20:00 PM
From: Lee	Read Replies (2) \| Respond to of 176387

Hi Chuzz,..Re:.If you subtract the core rate of inflation from the bond yield you get a real rate of return almost double the historic real rate of return on debt. Clearly, the credit markets are acting as if inflation will resume soon. From the June CPI and TYX from Friday's close - stats.bls.gov Consumer prices rose at a seasonally adjusted annual rate (SAAR) of 2.9 percent in the second quarter after advancing at a 1.5 percent rate in the first three months of 1999. This brings the year-to-date annual rate to 2.2 percent and compares with an increase of 1.6 percent for all of 1998. finance.yahoo.com^TYX&d=t From this I get a real rate of 3.2%. I remember we talked about this before and also that I had a table showing historical real rates but since my old notebook crashed, I don't have any evidence bookmarks any longer so I'm not sure if 3.2% is really that high. I thought 4% would be a high number. As for the cross-currents, I think Alan refers to them as 'imbalances'. <g> There are imbalances. The NAPM and Chicago PMI have for the past several months have shown a fairly substantial increase in the prices paid component of the manufacturer's reports. Plus there are isolated but hefty price increases in the PPI related strictly to demand in the housing market. Plus another serious imbalance is the widening of spreads between the corporate bond and the treasuries. Don't know why this is happening but last year when it happened, nearly all trading stopped in the credit markets. You are correct about the modest wage increases and that's still shown on the attached graph. It doesn't show last weeks 0.7% increase yet. I guess the worry is, as the available labor pool continues to shrink amid continued job growth, history has shown that the final outcome will be lots higher wages. stls.frb.org You know the Fed has data all the way back to the 30's or earlier? <g> I like the tax cut idea too it's just that the economy can't take a lot more demand right now. I think Alan had the better idea which was pay down the debt, let the surplus grow so we know it's real and save the tax cuts for when an economic slowdown does occur. stls.frb.org I like your tax cut ideas but also feel strongly that they should eliminate the death tax as well. Best, Lee