You made a spelling mistake in your subject heading. Did you mean "admonition" or "ammunition"?
Either way, I think Greenspan has run out of both! It is clear to me that he has absolutely no idea of what is going on -- and probably, in truth, never did have -- neither has any other economist who holds forth in public at the present time.
I've recently become fascinated by one simple problem. There is a limited amount of time in the day that's available to the average middle-class person (that is, the person with spare spending power) to use any more significant consumer products. By "significant" I mean (a) something that is novel and exciting enough to displace the time that is already spent on existing products, and (b) carry a big enough profit margin which will stimulate spending power and investment and thus the economy.
Where is this product? The irony of the IT bubble of 1990-2000 was that although it absorbed massive spending power by way of "investments", its typical products were pretty minor -- PCs. MP3s, Playstations and mobile phones -- relatively lowly priced and, at present, with vanishingly small profit margins.
Just think of what the all middle-class and most working class consumers have been able to achieve during the last century. They have been able to buy or rent a satisfactory home, they have bought one or more family cars (and don't have enough family members to need to buy any more now), they have been able to fill their homes with gadgets, and they have more than enough entertainments, both at home or at local events. Just what is supposed to come along which is going to fill our lives with extra excitement and joy?
I think we're seeing the end of rampant consumerism. And the sooner that economists (and politicians) put that into their pipe and smoke it, the quicker we'll have a better idea of where we're going.
Keith Hudson
At 08:01 23/06/2003 -0700, you wrote:
Ammo low, Fed eyes last bullet to lift economy
Federal Reserve's expected interest-rate cut this week may add modest stimulus but is not without risks.
By Ron Scherer | Staff writer of The Christian Science Monitor, June 23, 2003 edition
NEW YORK - For the past 2-1/2 years, the Federal Reserve has lowered interest rates to stimulate the economy. The result has been a virtual gully washer of money in the economy. But now, as the Fed contemplates yet a 13h cut, it has become much more difficult and complicated to pump up the economy by lowering short-term interest rates.
So, when the Fed meets Tuesday and Wednesday to review the economy and make a decision on interest-rate policy, it will have to consider why this rainstorm of cash hasn't done the job.
If business won't build new factories at these low interest rates, will even lower rates make any difference? And, as interest rates get closer to zero, Fed chairman Alan Greenspan will have to ponder if he needs to keep some ammo in his pouch in case he needs it later this summer.
"The Fed's decisions are becoming increasingly difficult," says Jon Blumenfeld, US Interest Rate Strategist at Commerzbank Securities in New York.
Despite the difficulties, Fed-watchers expect Alan Greenspan and his fellow bankers will reduce rates yet again - probably by a quarter of a percent. But, a half a point is not out of the question.
<http://www.csmonitor.com/2003/0623/p02s01-usec.html>http://www.csmonitor.com/2003/0623/p02s01-usec.<http://www.csmonitor.com/2003/0623/p02s01-usec.html>html
Keith Hudson, 6 Upper Camden Place, Bath, England
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