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

To: robert b furman who wrote (25132)	8/25/1998 8:47:00 AM
From: Carl R.	Respond to of 94695

I disagree Robert. Given falling prices for commodities I think the CPI would register "deflation" if it weren't for wage pressures which I believe are currently strongly inflationary. And as for the global economy being the main constraint on wages, clearly we have long lived in a national economy and yet we have always have had higher wages in some parts of the country than in others. Note that entry level work is 1/3 cheaper in East Texas than in much of the rest of the country, yet are people leaving East Texas to move elsewhere to earn a few bucks/hour more? No Robert, I believe that while labor wage rates are still affected by national and international factors, they are primarily determined by local supply and demand issues. I do agree that economic disruptions in other parts of the world will eventually come home to roost and will lead to unemployment at home through decreased exports, weakened farm economies, and perhaps eventually exporting jobs. But don't kid yourself, the Fed can affect employment as well. It is just that correcting rising wages and falling commodities requires opposite actions, so they take no action. You are looking for falling interest rates. The Fed will take this action when and if inflationary pressures on wages subside, or if the deflation of commodities gets more severe. They will not tolerate deflation, and if the CPI starts down, you can definitely expect some rate cuts. Carl