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To: Enigma who wrote (22618)	11/6/1998 1:04:00 AM
From: Ahda	Read Replies (2) \| Respond to of 116770

To: Ed Larkin (804 ) From: ahhaha Friday, Nov 6 1998 12:14AM ET Reply # of 806 Unknown. Not necessary to know that, only of value to comprehend the validity of the below statements. The FED is causing the growth of money to rise rapidly at a rate exceeding the ability of production to maintain output at a commensurate rate. The extra money goes into price increases. The FED is attempting to create a cost of money below its equilibrium cost. The evidence is that in spite of maintaining a high RP free float the federal funds rate remains substantially above target. The demand for loanable funds among banks is relatively high and the cautionary tone is exacting a premium of 30 - 50 basis points which remains essentially indifferent to flood gating. Firmness in interbank demand is confirmed by C&I loan growth which is starting to rise rapidly. If the FED persists in fighting the equilibrium rate for exogenous reasons, the money supply will continue to rise at the now entrenched rate of 20% per annum. If FED had let the economy sink into recession, all problems evaporate. Instead they have pursued countervailing policy. They are trying to smooth out a natural slowing because they fear the global repercussions. The problem is that such policy enables others on the globe to procrastinate concerning their own internal problems. Greenspan expressed today such a concern and Japan is demurring on tax cuts and consumption tax reduction. Eventually foreign economies will have to address liquidity problems again and that won't be at a time when the FED has any latitude. They will have painted themselves into a monetary inflation corner and they will have to get out of the way as the free market raises interest rates. The rate rise will smash foreign economies because US demand for foreign goods will substantially slow. It would have slowed anyway, but in an attempt to pump it up, FED is only pumping up inflation. All FED needed to do was lean against the wind regardless of the paper tiger. Now they have unleashed a real tiger. This wouldn't have happened, but Greenspan has lost the apparent wisdom he averred but hadn't assimilated in youth.