Darrell Udelhoven, Empowerment Communications ©1999 - 2001
When you tighten the money supply and raise interest rates you reduce the availability of Supply Side Capital which reduces important Supply Side competition which allows price setting or fixing. At the same time it chokes down the economy and puts the demand sider's out of work and businesses stop replenishing inventories with some going out of business. (A lot of the higher costs of living and producing and servicing, -- is the result of inflated fossil fuel energy costs!) So how did raising interest rates help? Is Stagflation your cup of tea? Could there be better alternatives?The first important initiative you should implement is an incentivized switch over to a Renewable Energy based Production Economy. This is combined with the recycling of all precious metals and all other materials possible. How does this make the alternative inflation moderators work?
The reality that you don't have to be concerned about running out of raw materials to fuel the production machinery allows you to provide ample supplies of industrial capital to all the Supply Side competitors. What's the secret to greatly increasing the Gross Domestic Product of countries worldwide?
The secret to increasing GDP worldwide is to broaden the Demand Side base of active participators in the economy and to increase the per capita incomes of this larger base.
We need to disincentivize monopolization and increase the incentivization of small and medium sized competitors in the Supply Side production, distribution, and retailing sectors.
Corporations have been allowed to make unseemly profits but, if if unemployment levels get too low and wages rise a little business costs will be driven up and this will overheat the economy.What a bunch of hogwash -- wages, and business profits need to be in an economic policy environment that creates a process of achieving a balance between business profits and real earnings of labor which will not be inflationary. When the Fed doesn't allow wages to rise -- we have authoritarian policy mandated inflation perpetrated on an economic class.
What we have now is stock market asset inflation that is being created by the speculative game of the players. However, the inflation that is generated by raising interest rates, rather than not limiting borrowing levels in various regulatory ways -- is being placed on those classes that can lest afford it.
The Press doesn't report on this 'sector relationship inflation' that is so devastating to the losers! Inflation is being generated primarily by excessive corporate profits, excessive CEO salaries, and financial sector inflation. Currency trading, high risk high return investment schemes, that work to bankrupt the lower class while increasing their taxes to pay for the financial and investment rip-offs that the government pays for.
The last thing in the world we need to do is penalize wage earning class. If farm prices begin rise would or will the Fed raise interest rates and destroy an economy that is in the process of balancing itself. Raising the real income of labor and family farmers will help reduce indebtedness, which will free up money for other purposes.
We need to begin use new policy ways and means to control these source origin causes of class inflation differential divisions. The raising of interest rates is not the appropriate means to achieve desirable ends, in fact it will cause inflation and related increases in the class economic differentials!
Due to the 15 trillion dollars of debt service shared by households, business, and government, raising interest rates is a flawed monetary economic policy that automatically generates inflation in all of the major economic arenas. As a result production costs are increased which increases overhead costs and prices. Therefore, raising interest rates forces business and industry to raise prices to cover increased operating costs. The consumer purchasing power is dramatically reduced, as a result the economy slows and everyone is a loser.
Also, this reduction in demand slows down the rate of inventory turn-over and volume of services, increasing the necessity to raise prices. Of course, this also reduces overall competition because, lower turn-over and service volume forces large numbers of competitors out of business.The Federal Reserve Board Chairman, Alan Greenspan, is talking about raising interest rates because according to him, the labor market is getting too tight and he thinks a slight increase in wages is terribly inflationary. The correct economic policy is to use other less harmful mechanisms to reduce the credit demands, the Fed is using outdated monetary policy ideas that work against equity of economic opportunity for all economic class sectors.
The scarce resources problem can be dealt with by promoting renewable energy resource use and by using it to recycle all the metals and other needed resources. Labor costs and possible shortages of resources has been comprising the Feds arguments and not the scarcity of savings that can be borrowed at home and abroad. Therefore the initiative of promoting renewable energy resources development and the full recycling of precious raw materials must be implemented worldwide, ASAP !If we don't begin to solve these problems now, we will be defeated by them later!
Thank God, the Fed hasn't raised interest rates when they threatened to or we could be in real trouble. The inflationary tax of high interest rates hits the most vulnerable economic areas of most economies.The causes of our global economic problems are obvious. Wide open global economic policies lead to huge over investments in the cheapest production countries in the world by Transnational Corporations . This over investment in production facilities has lead to an over production on the supply side, while at the same time, reducing, or at least, not sufficiently broadening the real per capita earnings and purchasing power of the consumer demand side economic units. If corporations are not allowed to fix prices there will be no impetus to raise them! Wake up Fed!
This gigantic wrongful investment waste of capital while the demand side was totally ignored -- lead to a vast failure of investments, this caused investors and lenders to pull out of those countries. The result has lead to increasing numbers of devastated economies. The correct global policy will monitor the balance between the breadth of per capita demand side earnings to the supply side's balance of production of goods and services. Yes, it is that simple. No, you can not throw away the tools that are needed to do this, such as: tariffs, quotas, antitrust, and global finance policies.
Lending institutions should be encouraged to limit credit levels by an effective formula! There are many ways to reduce borrowing levels, and we must seek them out and utilize them.Why are the antitrust laws not being used these days? Active enforcement would help reduce monopolization in all the supply and corporate monopoly purchasing arenas. Additionally, prioritized lending to supply side competitors is a proper solution to monopoly price fixing, both in the buying and selling arenas.
Lending policies and practices that facilitate genuine supply side competition is a win/win solution, whereas, tightening the money supply and raising interest rates greatly reduces the supply side competitive environment. This makes it much easier, in such a non competitive environment, for large corporations to arbitrarily raise prices.
It is obvious, with study and insight, to see that the real effects are the opposite of what the Federal Reserve Board claims they can, or are accomplishing, by raising interest rates. (More on this later).
Lending institutions can be encouraged or, be regulated if necessary -- to put a formula cap on lending practices.
There is no ideological enemy in the world more threatening to world peace than the idea that tight money policies and high interest rates can in any way control or regulate inflation -- this is a deadly idea that could bring on a worldwide economic depression of UNTHINKABLE CONSEQUENCES. It is critical that citizens understand these monetary economic policy realities before it is to late!We are setting ourselves up for a global depression and the combination of the Fed raising interest rates, and the totally flawed global economic policies that are creating huge economic opportunity imbalances could bring a crash that few would escape.
We must use numerous other policy mechanisms to control borrowing levels and institute on a worldwide basis, global and national economic policies that create far greater equity of economic opportunity for everyone.
Inflation is not directly related to economic Growth Rates; the Fed has been full of hot air! Every problem scenario the Fed brings up can be resolved without arbitrarily raising interest rates.Think about the horrific consequences that raising interest rates can cause! Do you know what those consequences are? Read this again and then do some additional research.
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