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To: niceguy767 who wrote (32340)	3/20/2001 3:02:43 PM
From: fyodor_	Read Replies (1) \| Respond to of 275872

Niceguy: Just short of required by about 150 basis points...Fed is enjoying the squirming it would seem...Yield curve remains inverted... Uhmm.. could you explain this "inverted yield curve" to me? I'm about as blank on it as your local accountant is on CPT-invariance ;-) -fyo

To: niceguy767 who wrote (32340)	3/20/2001 3:24:41 PM
From: pgerassi	Respond to of 275872

Dear Niceguy767: The problem with the Federal Reserve is that they are used to operating in markets that take a week to move into and out of the market. They are used to markets that may take six months to move the amount these have done in less than 1 or two. This causes them to rely on data that is generally a few weeks out of date because that is what they are used to. The problem is that markets and other wired systems now allow for fast moves in, out, and around. The data is useless for the net related JIT economy where the ups and down can occur with very little lag. 3 months can turn from going great guns to nervous back pedalling. Monetary policy affects things six months out. 3 months for the effects to show up completely in the wired world and 3 more months of lag for the historical measures to see the effects. So we get overshoot in going up and down followed by ringing (read volatility). The real problem is that micromanaging the economy can not be done in an era of high volatility (short waves that conspire to high useful data in noise). Only using measures that reduce lag time in measuring the true economy (new economy quickness on top of old economy rolling cycles) can we conciously control the new economy and get rid of the noise that screws up the control of the old economy. A smaller increment in the fed discount rate applied more quickly should provide better control of the new economy. For example a change every week in a 5 basis point increment ((down 5, none, or up 5), just when needed to control the new economy) followed by a change measured in 25 basis point increments (could be any integer (negative, zero, or positive), when needed to control the underlying old economy) every policy meeting every three months, say right after each calendar quarter. This allow the quick ones to act to dampen moves by the new economy with overall interest rates to be set for the old slow economy (a sanity check on the quick ones (against panic or euphorea)). This is what is needed to remove the volatility caused by the speculators of these institutional moves. For example after 4 moves down out of 12 possible by the quick movers, the FOMC decides to lower rates 25 basis points and set the quick supplemental rate to zero basis points (act like another quick downward move of 5 more basis points). Pete