In One Eye

Tuesday, May 03, 2005
 
Juxtapose these three stories.
[T]he Fed is ... expected to stay the course, raising interest rates by a moderate quarter-point [today], the eighth such increase since the central bank embarked on the current credit-tightening campaign last June.
and
With crude oil prices hitting record highs again ..., the Labor Department reported that payroll employment increased by a meager 110,000 jobs [in April], the weakest growth since July. Persistently high oil and gas costs appear to be taking their toll on employers and consumers alike, ultimately resulting in curtailed hiring, economists said.
and
The US economy grew at its slowest pace in two years during the first quarter, expanding at a 3.1% annual rate as consumers and businesses were pinched by rising energy prices.

Growth in gross domestic product (GDP) was the weakest since a 1.9% pace during the first quarter of 2003 and marked a surprisingly sharp deceleration from the 3.8% rate registered in the fourth quarter 2004, the Commerce Department said in a report [last] Thursday.
I'm certainly no economist, but to tighten money while both job growth and the economy slow seems at best cavalier to me.

And the reason for the tightening seems every bit as cavalier.
David Wyss, chief economist at Standard & Poor's in New York, ... predicted that the Fed will keep raising the funds rate for the rest of the year, leaving it at 4.25 percent at the last meeting in December, a point where the central bank will feel the funds rate is now at neutral, neither so low as to stimulate economic growth or so high as to depress economic activity.

"I think Greenspan would like to get back to neutral before he leaves the Fed [in January]," Wyss said.
Ah, what the hell—Iraq was invaded so that egocentric individuals could feel good about themselves. The oligarchs might as well use the same rationale in creating monetary policy.