Fed Interest Rate Increase
Re “Fed Hikes Interest Rates; Increase Is Biggest of the Year,” Nov. 16:
I am sooooo confused! I thought that “inflation” was having my costs go up without any offsetting value. The Federal Reserve Board’s increase in the prime rate and discounts will increase the cost of living for everyone with a variable rate mortgage, everyone carrying a line of credit, everyone with a credit card balance, everyone in business borrowing money, everyone building homes and everyone buying homes without any offsetting value--and they are doing this to avoid “inflation.”
My cost of living is guaranteed to go up without any offsetting value because of the actions of the Federal Reserve Board, based on the “possibility” of it going up due to inflation next year? What am I missing?
ROBERT E. AYRER
Huntington Beach
The hike in interest rates put into effect by the Federal Reserve Board, and the Republican takeover of House and Senate committees close a vicious equation: Our financial masters make it clear they intend that at least 6% of us will always be unemployed.
Our political masters insist that the unemployed, after two years, shall receive no support. If the unemployed cannot support their children, then the children will be taken from them. If the unemployed steal to feed their children, or to keep their children from being homeless, then they must go to prison, for a long time, to learn their lesson.
What inhumanity! What hypocrisy, claiming the past elections as a triumph for Christian values.
MICHAEL BLOXHAM
Forest Falls
Robert Kuttner’s overly simplistic view (Commentary, Nov. 14) of recent Federal Reserve Board actions displays a surprising ignorance of economics and the complex reasoning behind interest rate adjustments.
Citing the oft-repeated “natural” rate of employment as dictating Fed action, Kuttner completely ignores relevant currency and monetary policy issues. The dollar’s long-term slide against the yen and German mark, and the causal effect on the real value of U.S. debt and trade deficit are of crucial importance in Fed decision-making.
The idea that the Federal Reserve Board is “denying Clinton the fair fruits of his economic program” and should be held “democratically accountable” to politicians and an electorate with myopic agendas and little concept of economics further demonstrates this article’s absence of credibility.
RICHARD LINDSTOM JR.
Dana Point
If the American people are unhappy with the pace of our economic recovery, don’t blame President Clinton. Fed Chairman Alan Greenspan, a Republican appointment, is obsessed with sacrificing a potentially strong economic rebound at the altar of exaggerated inflationary fears. It is my hope that the President will not reappoint Greenspan, when his present term expires, early 1996.
BOB TEIGAN
Toluca Lake
At last! A thoughtful criticism of the Fed. Kuttner’s piece is right on! I believe it was Harry Truman who said, “What we need is more one-armed economists. Every time you ask one a question, they give you an answer followed by ‘on the other hand.’ ”
The divergence of opinion among economists is reason enough to examine the track record of those in charge. Greenspan wrote letters to the bank regulators asking them to exempt 14 savings and loans from the more Draconian regulatory provisions of the law due to their great expertise in dealing in sophisticated investments. Of those 14, only two are left in business. The remaining dozen, including Lincoln Savings, were turned over to the Resolution Trust Corp. He subsequently was appointed to his present position at the helm of the Fed.
Someone should question his judgment in raising interest rates based upon clearly flawed economic assumptions, today!
FRANK J. LYNCH III
Cerritos
Kuttner very accurately points his finger in the direction of the saboteurs of President Clinton’s economic plan, Greenspan and his team of economic advisers.
It is ironic that a U.S. economy, gradually pulling itself from the morass of recession, is being cavalierly choked off by Greenspan, just because he and members of his bandwagon have their way. It is all the more ironic that the President is stymied to act.
I think it is high time Congress came to the rescue to empower any U.S. President with the choice of picking his economic team, including the choice of who his Federal Reserve Bank chairperson will be--after all, the President assumes the sole responsibility for the fallouts from his presidency, including what economic picture is portrayed by his Administration.
MIKE C. OKEREKE
Los Angeles
