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To: ahhaha who wrote (12817)	6/10/1998 1:42:00 AM
From: ahhaha	Read Replies (1) \| Respond to of 116791

Tuesday June 9, 11:15 am Eastern Time INTERVIEW-US inflation higher than CPI -NY Fed By Isabelle Clary NEW YORK, June 9 (Reuters) - The U.S. inflation trend is less friendly than the Consumer Price Index (CPI) indicates, a factor that keeps the debate over preemptive monetary policy moves much alive at the Federal Reserve, a senior New York Fed official said on Tuesday. INFLATION AND PREEMPTIVE POLICY: ''The question is not whether we have an inflation problem today but whether we have one on the horizon and how soon should we do something about it,'' Cecchetti pointed out. Cecchetti said the Fed has succeeded in curbing a key factor for future inflation -- inflation expectations. Inflation expectations sharply declined in the marketplace after the Fed adopted a preemptive policy approach in 1994. ''You can see that three to five years out, there is almost no fear of inflation. The yield curve has flattened substantially,'' Cecchetti also said. The U.S. Treasury yield curve has flattened as investors, confident the Fed will remain vigilant about future price pressures, are building less of an inflation premium in long-term market rates. THE INFLATION OUTLOOK: Cecchetti agreed current data suggest inflation is well under control, despite a booming economy. ''Labor market tightness can lead to wage increases that may translate into price increases or reduced profit margins. (Right now) if you look at prices, you don't see inflation,'' he added. The main reason for the different inflation pictures shown in the overall CPI and core inflation measures are the slumping oil and commodities prices. Some policymakers and Fed economists have cautioned that, once these positive price shocks end, inflation numbers will deteriorate and move closer to the readings of the median CPI. THE THINKING BEHIND U.S. MONETARY POLICY: Cecchetti stressed the Fed is very committed to keeping the U.S. economy on an even keel -- avoiding both inflation spikes and growth swings. ''Policy is a balance between what sort of inflation level you can tolerate and how high a price are you willing to pay to reach that level,'' added the New York Fed chief economist, who said this was in line with the Fed's dual mandate for modest inflation and low unemployment. ''We actually do what the (dual) mandate said we should do -- encourage growth and price stability ... stabilize prices and output at the same time,'' Cecchetti said. After you read this you think, "well, they're doing what Ahhaha says they aren't doing". Several years ago Greenspan said that the objective, if not the sole objective of the FED was price stability. Then he said that that means 0% price inflation. Since then he and they have been making concessions such that the objective is now the "dual mandate of modest inflation and low unemployment". This is the same kind of concession the McChesney-Martin, Burns, and Volcker FEDs made, and it is the exact wrong strategy to employ because it refutes the assertion about containing inflationary expectations. It grows those expectations. Any concession grows the expectations. I said in 1982 on Friday Aug 13 when the Volcker FED opened the money floodgates to prevent America from falling into a Greeeeaaaaaat Depression that the pain of 21% interest rates was being thrown out the window in order to fight a problem that existed only in Galbraith's textbook. These fools don't learn from history. They always find a rationalization to pre-empt all lessons. Now they think they are doing what is right, but they can't see the forest because of the trees. The over powering motivation is to prevent suffering and that's where the source of suffering lies. I have stated this over and over, it is called pretense to knowledge. It afflicts all sciences too. Then thus guy Cechetti says, "Policy is a balance between what sort of inflation level you can tolerate and how high a price are you willing to pay to reach that level,'' Well, what level of price inflation can inflationary expectations tolerate? Next, we get, ''We actually do what the (dual) mandate said we should do -- encourage growth and price stability ... stabilize prices and output at the same time,'' How can you stabilize growth and output at the same time? He is implying that the FED can lead a horse to water and make it drink. Greenspan has sat in front of Congress and reiterated that there is a limit what the FED can do. The FED can make loads of money available at .1% interest rate, but if people are scared they won't borrow. If the FOMC was shut down and government got out of interfering with the free market's attempt to adjudicate between the supply and demand for money, none of the nonsense of the latter part of the 20th century would have occurred. There's no way you can convince the great university intellects of this elementary truth. They all say, "well. that's true but... but it isn't doable. They are saying just like the same clowns said about cutting taxes which has been the sole impetus of the prosperity of the 90's, that "it isn't possible to do what is obvious. There are too many stupid people out there who wouldn't want the war on wealth to end". And this Fed economist, Cechetti, makes 300G's per year. It's the privilege of the entitled elite. You don't wonder much why the working man wants to go out on strike. Instead of letting the free market gradually raise and lower rates, the FED comes in and fixes rates. The fixing causes disequilibrium which mushrooms into rational expectation of rising prices. The FED then throws gasoline on the fire, because they can't let unemployment rise. The excess money creation fuels the inefficient activity boom until the shrinking real supply of money is borrowed faster than the FED is creating it especially to speculate in rising prices. Rates rise. The FED throws more gasoline on. Etc., etc. ad nauseum. We've all been through this but most of the guys who remember it are embalmed in booze on their estates. The elite don't suffer. Only the slobs. In our society there are the gods and the slobs. The poor, the elderly on fixed incomes, the unentitled, the working man, are the slobs. Everyone else esteems themselves as protectorate of the slobs. However they won't cross picket lines, they won't vote against socialism, they like that the FED is keeping interest rates down. There is only one mandate. Find a way to enable not just the escape from New York, but the "beam me aboard, Scotty".