Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: robert b furman who wrote (25114)	8/24/1998 11:10:00 PM
From: N	Read Replies (1) \| Respond to of 94695

Robert, appreciate and share some of your concerns. However, the fed targets the federal funds rate , about 5.5% right now and sets the discount rate ?%. That is its influence on the prime which is set by major banks. Yields on treasuries reflect price of future dollars set by the market. Nancy

To: robert b furman who wrote (25114)	8/25/1998 2:44:00 AM
From: Carl R.	Read Replies (1) \| Respond to of 94695

You ask, where does inflation exist? You correctly point out that it is not in the area of commodities (i.e. gas) or interest rates. The answer is in the area of wages. We have very low unemployment, which is causing rapidly rising wages. Of course minimum wage has risen from $3.35 to $5.15 in recent years, but low end wages have risen even more than that, at least around here. In this area fast food which typically pays minimum wage are paying $8/hour. This gives the Fed a problem. Raise rates to slow employment and you strengthen the dollar and increase the deflation in commodities. Or lower the rate to stop the advance of the dollar and stabilize commodity prices but increasing the wage inflation pressure. Thus far the Fed has reacted to this difficult situation by keeping interest rates stable. The net result of rising wages and falling commodities has been net of no or low inflation so far. But if the world problems spread to the US and we get some unemployment we could see falling wage rates and clear deflation. Clearly that will give the Fed latitude to decrease interest rates. So watch for declining exports, movement of manufacturing overseas, and weak economies in farm (commodity producing) areas, etc. to cause the employment to soften. Then you will see falling interest rates. Carl