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To: LPS5 who wrote (127)	9/19/2002 8:37:49 PM
From: dannobee	Respond to of 2534

Interesting. Keynes, btw, was a communist. It seems now that quite a few of his ramblings are specious; his interest rate lucubrations fit in there too. If the Fed were to correctly target interest rates as a proxy for economic output (and secondarily, "full" employment), then there should be a different tack on the current policies. Interest rates have always been relative to inflation (i.e., the "real" interest rate). If the Fed were to ease ST rates, it must learn to better gauge its effect. The current interest rate has remained steady at 1.75%, while the CPI continues to fall. Thus, real interest rates remain higher than when the ST IR's were set. The Fed should cut again and target real interest rates to stimulate output. But that's not the whole story. The Fed can't do much about LT interest rates (heaven forbid, we give them a few tools and they can't even learn to work those correctly). LT interest rates remain more a product of fiscal policy in our current system. And we all know that fiscal policy changes like the wind, depending on the agenda of politicians. Do politicians really understand economics? Can they comprehend the long term ramifications of their policies, including deficit spending and tax policy shifts? I sincerely doubt it.