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

To: NickSE who wrote (83397)	1/13/2000 9:24:00 PM
From: NickSE	Read Replies (2) \| Respond to of 86076

Did some hackers break into the FED's website and add this crp about wealth effect? WTF is that about? ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Productivity-driven supply growth has, by raising long-term profit expectations, engendered a huge (aka really f8cking big) gain in equity prices. Through the so-called "wealth effect," these gains have tended to foster increases in aggregate demand beyond the increases in supply. It is this imbalance between growth of supply and growth of demand that contains the potential seeds of rising inflationary and financial pressures that could undermine the current expansion... ...Thus, the impetus to spending from the wealth effect by its very nature clearly cannot persist indefinitely. In part, it adds to the demand for goods and services before the corresponding increase in output fully materializes. It is, in effect, increased purchasing from future income, financed currently by greater borrowing or reduced accumulation of assets... ...Increasing perceptions of wealth have clearly added to consumption and driven down the amount of saving out of current income and spurred capital investment... ...As I noted at the beginning of my remarks, it may be many years before we fully understand the nature of the rapid changes currently confronting our economy (my fav. part)**. We are unlikely to fully comprehend the process and its interactions with asset prices until we have been through a complete business cycle ... --- Chairman Alan Greenspan (January 13, 2000) federalreserve.gov