Posted on 08/23/2004 5:49:43 AM PDT by OESY
...Alan Greenspan, the Federal Reserve chairman, has taken very little political heat for raising interest rates in the midst of an unquestioned economic slowdown -- and in front of sensitive national elections -- because the Fed and conventional wisdom blame the slowdown on the recent dramatic increase in energy prices. The crude-oil hike is giving the Fed chairman convenient political cover.
But with interest rates so low for so long in this country, consumers have built up an enormous amount of debt. When the Fed made it clear that it would be raising rates on its ascent to interest-rate neutrality -- which increased the expected burden of this debt -- consumers started to cut back on their purchases....
Instead of raising rates when the economy was booming in the first quarter of this year and could easily sustain the rate hikes, Greenspan and company waited until the stimulus from last year's tax cuts was wearing off in June to start the ascent to interest-rate neutrality.... Mr. Greenspan pooh-poohs the slowdown, calling it a "temporary lull."
...First it was recession. Then it became deflation. Now it's inflation: Even though current inflation numbers in the U.S. are benign, the Federal Reserve presently believes that unless it raises interest rates by 25 basis points at each and every meeting this year, it will have to jam on the brakes six months down the line to stop an expected inflationary buildup....
Indeed, Mr. Bush has good reason to fear Mr. Greenspan's latest bout of "irrational exuberance" about the U.S. economy, because it threatens to torpedo the nation's already shaky stock market....
If only for reasons of political neutrality, it is time for Mr. Greenspan to take a pause in his ascent to interest-rate neutrality and skip raising interest rates at the September FOMC meeting....
(Excerpt) Read more at online.wsj.com ...
Didn't Greenspan do the same thing to Bush 41 ?
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