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Dan Spillane: Fed Speaks, But Can't Call Jobs Home

Citizens for Corporate Accountability
Dan Spillane

Federal Reserve Speaks, But Can't Call the Jobs Home

-Serious Problems With 02/11 Federal Reserve Testimony

(SEATTLE) 02/12/04 - Alan Greenspan says a continuing worry is that the Fed policy could become "improperly calibrated" to economic developments. Indeed--"fedspeak"--what does he mean?

It turns out, in the past when the Federal Reserve has failed, it is because their moves to affect the economy have not worked for one reason or another (for example, failing while lowering target interest rates in order to achieve higher employment--sound familiar?) . Such failures tend to end badly. Perhaps even, like the 1970s, a period of "stagflation", or more like the present-- periods of alternating stagflation and deflation, relying heavily on borrowing at both the federal and consumer level.

Greenspan also mentions that currency-related changes to profits have been t emporarily offset by currency hedging activities. He mentions foreign companies--but neglects to mention similar effects related to domestic companies, faced with, among other things, skyrocketing aluminum, copper, and energy prices, all coming at the same time. Forget about new hires--how can companies like GE, Boeing, and Caterpillar operate at all domestically, once currency/inflation hedging runs out? The most recent manufacturing survey ("ISM") shows a prices paid component not seen since right before the 2000 stock market crash. In short, US inflation creation is far outrunning job creation--and apparently, running US jobs offshore in the process. Might this be an example of Greenspan's "improper calibration"?

What Greenspan doesn't mention is more interesting--the effect low interest rates have had on foreign economies--sending several foreign stock markets into bubbles, which dwarf those of the 2000 bubble. Thailand, Brazil, Turkey...the list is long. A bubble is one type of "improper calibration."

Finally, it is striking to see a headline claim of "vigorous growth ahead"--if that were truly the case, interest rates would not be at multi-decade lows. After all, it is a long, long way up to a "normal" interest rate environment--the only way from down this low, is up. Something clearly is "improperly calibrated" between what the Fed is saying about the economy, and what interest rates are set to.

Face it Greenspan, problems go way beyond the federal deficit. Lending and equity growth in US markets is way, way ahead of an economic reality that is not only way overdue, but may never materialize.

The sooner the US admits it has a stock market and lending market appropriate for an economy with two to eight million more jobs--instead of less--the closer the economy will be to a sustainable recovery. The Fed cannot fix the mess the Bush administration created--a fact both liberals and conservative Republicans increasingly understand.


- Citizens For Corporate Accountability is a 'Think Tank' non-profit, dedicated to public interest and the detection of corruption which endangers the basics of democratic society. It was founded in 2003 by Dan Spillane. The first major issue identified by Mr. Spillane, Electronic Voting Reform, has received significant national media attention subsequent to Mr. Spillane raising concerns to Congress and a number of activists since the summer of 2002. It was recently revealed that significant problems exist nationwide in this area--as a result, several new bills are pending for the 2004 Congress.

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