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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: Lee who wrote (31429)	5/12/2000 10:30:00 PM
From: WTMHouston	Read Replies (2) \| Respond to of 50167

I am wondering what others think of a theory that raising interest rates in a tight labor environment may actually cause rather than abate inflation. Generally, and I know I am oversimplifying this, it is thought that an increase in interest rates will slow things down by causing money to be diverted to interest payments than to "productive" uses. As a result, spending (borrowing) will slow and thus have a slowing effect on the economy. What happens though when companies say "we are not slowing anything down, we will just raise prices to offset the higher interest costs" and in a tight labor market consumers say "if our interest expense is going up, we NEED to demand more money from our employers, which we can do given the tight labor market. If our present employer will not pay it, we will just shop around. Since the labor market is tight, we will find someone else who will pay us more since we are in demand." Of course, when the consumer gets more money, it will affect the costs of the employer and will cause them to HAVE to raise prices, i.e., inflation. Thoughts? Troy

To: Lee who wrote (31429)	5/15/2000 9:49:00 AM
From: Lee	Respond to of 50167

Economic Data for Monday, May 15, 2000 Industrial Production for April = +0.9% Capacity Utilization = +0.4% to 82.1% bog.frb.fed.us Industrial production increased 0.9 percent in April after an upward-revised increase of 0.7 percent in March. Manufacturing output increased 0.8 percent, with most major industries posting gains. The output of utilities rebounded 2.8 percent, while output for mining rose 0.4 percent. At 143.7 percent of its 1992 average, industrial production in April was 6.1 percent higher than in April 1999. The rate of capacity utilization for total industry rose 0.4 percentage point, to 82.1 percent, a level about even with the average for 1967 to 1999.