Clintonomics

  I found an article that mirrored my view but for the first time I saw someone actually put it into written words. Its proper economic form that whenever the economy improves, and employment levels are high, generally, there are high levels of inflation. Likewise, whenever the economy suffers, and employment levels are terrible, generally, there are low levels of inflation.

  The author then goes on to state how clinton however managed to dodge this particular bullet during the IT bubble. And I think the author understands that high employment, high economic growth, and low inflation was masking something that was not being discussed. The sudden explosion in the trade deficit.

   When employment and wages rise, so does the price for goods. The baker is making more income because the butcher must pay the baker more. The butcher is making more income because the baker must also pay him more. But there was not that much inflation during the IT bubble. And as the above chart suggests, its mostly attributed to the trade deficit. Low priced imported goods help reduce the impact from monetary expansion led by greenspan. Since the foreign countries were not interested in buying american goods, they were unable to ship the inflation right back to the united states. That money most likely ended up in some kind of foreign reserve system, being held up as IOUs. For americans, the us dollar is legal tender. For foreign countries its a national debt. A promissory note indicating the us will one day repay in the form of goods and services.



Greenspan turned to a policy of easier credit in 1995; in 1996, he resisted pressure from some Federal Reserve Board members and refused to raise the Fed funds rate..Greenspan’s contribution to the economic boom of the late 1990s was that between 1996 and mid-1999 he barely raised interest rates at all, despite a rapid increase in the rate of growth and a falling unemployment rate. By 1999, the unemployment rate had fallen to nearly 4 percent. Two years earlier, most economists believed any rate below 5.5 percent would produce inflation. Greenspan openly and even aggressively defied the conventional wisdom.

	Fed makes surprise rate cut  January 3, 2001: 5:04 p.m. ET Cites signs of economic slowdown; cuts fed funds rate to 6% NEW YORK (CNNfn) - In a surprise move, the Federal Reserve slashed short-term interest rates Wednesday and signaled it is ready to make further cuts to keep the U.S. economy from sliding into a recession.

Greenspan's Speech Focuses On Deflation, Not Inflation

By EDMUND L. ANDREWS
Published: December 20, 2002

WASHINGTON, Dec. 19 — Alan Greenspan, the chairman of the Federal Reserve, warned tonight that deflation, a general decline in prices, could be more damaging to economic growth than inflation...
  The Fed's benchmark interest rate on overnight loans between banks is now at 1.25 percent, its lowest level in 41 years and within striking distance of the ''zero bound.''
In both his discussion of deflation and his cautious assessment of the economic outlook, Mr. Greenspan reinforced the impression among many economists that the Fed did not plan to tighten monetary policy soon.

  Greenspan is orchestrating a boom and bust cycle and its responding to him almost like clockwork. But currently, even at near zero percent interest rates, the economy is still terrible.