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To: she_x who wrote (19512)	5/19/2000 8:15:00 PM
From: she_x	Respond to of 35685

Here is the piece by Robert Novak that Kudlow referenced. suntimes.com For Greenspan, politics beat sound policy May 18, 2000 BY ROBERT NOVAK SUN-TIMES COLUMNIST Going into Tuesday morning's meeting of the Federal Open Market Committee, it is unlikely that Alan Greenspan felt like the master of the universe he is reputed to be. He had to choose between protecting his position as Federal Reserve chairman or following sound economic practice. It was no surprise that the man appointed by three presidents to head the central bank took the political course. The FOMC, the Fed's policymaking body, certainly could not point to hard economic warning of inflation as the reason to raise interest rates by 50 basis points (or one-half of 1 percent), following six 25-basis point hikes in less than a year. Early Tuesday before the central bankers met, the latest non-inflation report showed a 0.2 percent increase in the Consumer Price Index. There is little doubt that Greenspan's personal preference would have been 25 basis points. But the hard reality is that the chairman is no dictator, and did not have the votes. The FOMC's majority insists on still higher interest rates, not because of access to secret inflationary statistics, but to slow down economic growth. There are signals that the Fed will keep putting on the brakes until a recession kicks in. Indeed, after 11 months of gradual tightening by the Fed, there are signs of a slowdown going into the general election campaign. That's not what Al Gore wants. But he and his colleagues in the Clinton administration are muzzled by a tacit 7 1/2-year compact that has proved mutually beneficial. Unlike past administrations, this one refrains from public recommendations, criticism or second-guessing regarding the Fed. In return, the conservative Republican Fed chairman has turned a blind eye to Clinton's tax-and-spend policies. However, Democrats in Congress are under no such restraint. Sen. Byron Dorgan of North Dakota, Senate Democratic Policy Committee chairman and an old-fashioned prairie radical, took the Senate floor to close Monday's session and protested what the Fed chairman was going to do the next day: "Mr. Greenspan has sort of used himself as a set of human brake pads. His only mission in life somehow is to slow down the American economy." Dorgan's heart is in the right place, but his understanding of Federal Reserve politics is faulty. Greenspan, no troglodyte banker, is an agile economist with a shifting viewpoint. He has been considered a believer in the "new paradigm," which does not equate economic growth with certain inflation, but most of his colleagues disagree. The Fed's anti-inflation hawks are driving policy. Laurence Meyer, a former St. Louis economic forecaster and economics professor who was named a Fed governor by President Clinton four years ago, has been resolute in targeting economic growth. Meyer had the votes Tuesday, and it is doubtful that Greenspan could have overcome him. But he didn't try. Not since an intransigent Paul Volcker was voted down by his colleagues on March 6, 1986 (in a decision to cut interest rates) has a Fed chairman been rejected and humiliated. That vote ended the Volcker era, and he left as chairman the next year. Greenspan, just reappointed for a third term by Clinton, will not take that path. But what's next? Super-hawks do not want to stop with a federal funds rate (on lending between banks) set Tuesday at 6.5 percent. They contend that this interest rate should be at the same level as the nominal (that is, not adjusted for inflation) rate of economic growth, now 8 percent. To follow such a painful course would mean climbing another 150 basis points in the immediate future. Nobody thinks that is possible, but Meyer and his colleagues seem determined to raise interest rates so long as the economy is growing. In fact, despite the growth rate, there are ominous economic indicators. Retail sales and auto sales are both down. The loss by NASDAQ of one-quarter of its wealth certainly takes significant consumption money out of the economy. Those were real numbers faced by Greenspan Tuesday. The conflicting set of numbers: the votes that were lined up against him by inflation hawks on the FOMC. The political choice was obvious.

To: she_x who wrote (19512)	5/19/2000 8:29:00 PM
From: abuelita	Respond to of 35685

She - I don't understand. Why is is bad to have too many people working. Too many people getting raises. Too much investment. Too much productivity. Too much -- prosperity. Why is it good to have massive unemployment, bankruptcies, foreclosures on mortgages, suicides. General unhappiness. I must be missing something here, but it doesn't make sense to me. rose

To: she_x who wrote (19512)	5/20/2000 2:11:00 AM
From: bela_ghoulashi	Respond to of 35685

she_x: Thanks for two interesting and rather sobering articles. If the Fed hawks indeed succeed in suffocating, stifling, and bludgeoning economic growth down to the level of 1 1/2% per year, wouldn't their own policy then dictate that they must reduce the Fed Funds rate to 1 1/2% as well?

To: she_x who wrote (19512)	5/20/2000 10:24:00 AM
From: Jim Willie CB	Read Replies (1) \| Respond to of 35685

Federal Reserve course (setting rates to growth) is disastrous for years and years, the prudent and workable approach was to set rates roughly to the base inflation rate PLUS 1.5-2.0%... experts called the 1.5-2.0% margin "real rate of borrowing" or "inflation adjusted interest rate"... with FedFunds now at 6.5% and inflation somewhere around 3.0-4.0%, we now have historically EXTREMELY high real rates of twice the consistent level demonstrated to work here is why the Lawrence Meyer approach linking interest rates to growth rate is disastrous... by the way, I have long regarded Meyer to be an utter fool & idiot, and that appointment by Clinton to be his worst outside the Cabinet setting rates to the growth rate is like chasing a dog's tail that slowly shrinks to nothing... you never catch it... it is like chasing a scent that is slowly lost in the forest mist... by the time you apparently catch up to that growth rate (measured in the past), your new rates which have been operating on the economy for the past quarter have been to set into (un)motion a strict limiting effect that cannot quickly be reversed if the Federal Reserve were to raise rates by 150 basis points over the course of three months, then remove all 150 bpts in the next three months, it would take the economy 6-9 months to recalibrate and stabilize... this is a delicate balance being fuxxed with, and it should never be fuxxed with by the time interest rates approach the growth rate from the recent past, such rates are debilitating... eventually 12 railroad cars will be careening over the cliff, with 88 more cars behind destined to follow the current state of economic data analysis and subsequent monetary policy is absolutely astonishingly utterly pathetic and inadequate now... Phillips Curve relating inflation to unemployment remains on the walls like dogma, yet has been disproved and challenged repeatedly if Lawrence Meyer prevails over our more steady prudent Alan Greenspan, then we and the entire western world economies are in big trouble I suspect Greenspan bought himself a controlling card to use in the next meeting, provided we see some moderating economic data shortly... like goddam soon / Jim Willie