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Pastimes : The Justa and Lars Honors Bob Brinker Investment Club Thread -- Ignore unavailable to you. Want to Upgrade?

To: Wally Mastroly who wrote (1501)	10/11/2001 7:02:27 PM
From: Wally Mastroly	Read Replies (1) \| Respond to of 10065

Greenspan cites need for new price measures: biz.yahoo.com - Also; TEXT-Greenspan's speech to St. Louis Fed- Oct, 11th When industrial product was the centerpiece of the economy during the first two-thirds of the twentieth century, our overall price indexes served us well. Pricing a pound of electrolytic copper presented few definitional problems. The price of a ton of cold rolled steel sheet, or a linear yard of cotton broad-woven fabrics, could be reasonably compared over a period of years. But in our new century, the simple notion of price has turned decidedly ambiguous. What is the price of a unit of software or a legal opinion? How does one evaluate change in the price of a cataract operation over a ten-year period when the nature of the procedure and its impact on the patient has changed so radically? Indeed, how will we measure inflation, and the associated financial and real implications, in the twenty-first century when our data-using current techniques-could become increasingly less adequate for tracing price trends over time? So long as individuals make contractual arrangements for future payments valued in dollars however, there must be a presumption on the part of those involved in the transaction about the future purchasing power of money. No matter how complex individual products become, there will always be some general sense of the purchasing power of money both across time and across goods and services. Hence, we must assume that embodied in all products is some unit of output, and hence of price, that is recognizable to producers and consumers and upon which they will base their decisions. Doubtless, we will develop new techniques of price measurement to unearth those units as the years go on. It is crucial that we do, for inflation can destabilize an economy even if faulty price indexes fail to reveal it. For all these conceptual uncertainties and measurement problems, a specific numerical inflation target would represent an unhelpful and false precision. Rather, price stability is best thought of as an environment in which inflation is so low and stable over time that it does not materially enter into the decisions of households and firms. Nonetheless, I cannot help but conclude that the progress that the Federal Reserve has achieved over the years in moving toward this old definition of price stability has contributed to the improvement in our nation's longer-term growth prospects that became evident in the latter part of the 1990s. So, for the time being, our conventional measures of the overall price level will remain useful. President Poole has picked an appropriate topic for this group to consider. The historical record indicates that the increased transparency of the Federal Reserve has helped improve the functioning of markets and enhanced our credibility. But, to repeat, openness is more than just useful in shaping better economic performance. Openness is an obligation of a central bank in a free and democratic society. U.S. elected leaders chose to vest the responsibility for setting monetary policy in an independent entity, the Federal Reserve. Transparency of our activities is the means by which we make ourselves accountable to our fellow citizens to aid them in judging whether we are worthy of that task."