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Non-Tech : Knight/Trimark Group, Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Dalin who wrote (876)	5/5/1999 11:56:00 PM
From: monsoon	Read Replies (2) \| Respond to of 10027

Here's why I think the Fed will raise rates..... The TOP responsibility of the Fed is to fight off inflation. It's true that we have been in an ultra-growth period over the last four years with low inflation. There are two common theories to this behavior and they are a)the weak world economy and b)increase in productivity due to technology. With this in mind, here are the reasons.... 1. Asia economy is recovering---->no more cheap imports---->nominal price increase in goods---->price index increase (or inflation). 2. Savings in the U.S. is non-existent. I just went to a seminar given by the president of the St. Louise Fed bank and he mentioned that the U.S. gross saving last month was ZERO, that's right, Zilch. And guess what's the driving force behind this, you guessed it, the booming stock market giving people a sense of wealth (paper wealth) and the propensity to go out and spend their money. ------->increase in consumer spending----->price index increase--->inflation. 3. Labor market tightening, the U.S. job market is at full employment is the true sense of the word. Tight lab market----->wage pressure (meaning higher wages)------>increase in consumer spending---->inflation. 4. Productivity can only hold offset inflation for so much, with the economy growing at 5-6% a year, it's unrealistic to expect productivity to keep pace----> inflation. Now this may sound like a lot of mumbo-jumbo, but if the Fed raise rate, every PCLN stock holder will understand its importance :-).