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Blogs by Lawrance G Lux
Interest Rates 1/4/2004 11:58:14 AM
Just finished reading some Greenspan and Bernanke articles, also a article by Brad Delong about discrepanies between sale of Goods and Services and Personal Income statistics.
Greenspan and Bernanke try to defend low Interest rates, which is current Economic thought, while Delong asked whether Personal Income statistics may be more consistent for judging economic performance. Most Readers would not see a correlation between the three arguments. There is one! Low Interest rates incite the Stock Bubbles which Greenspan specifically discusses, these Bubbles are the foci of Inflation which Bernanke discusses, and these Bubbles absorb the disparities between Product Sales and Personal Income accounts.
Housing has been effectively refinanced at low Interest rates, within the Period of Fed reduction of Interest rates. The pace of new Housing Starts must slow, or there will be overconstruction in the Housing sector, with artifical Housing costs introduced because of the level of capital investment. Manufacturing recapitalization has actually been keeping pace throughout the period of the Bush administration, and has risen too high since Q3 2003. This was hidden by the level of Outsourcing to foreign manufacture, which has been going on. The excessive rate of recapitalization is inciting its own Sector inflation. Resumption of more effective Interest rates at this time would raise Consumption dramatically within the Consuming Sector fueled by financial instrument returns. This Author estimates Consumption would increase by 2.1% within a twenty-four month period. The Fed should reconsider its current position. lgl
