Kuttner on the Fed.

[Jim Devine <JNDF%LMUACAD.BITNET@xxxxxxxxxxxxxxxxxx>]

Robert Kuttner's column in the L.A. TIMES (op-ed page: "column
left" 3/27/94) has an interesting point.  In his criticism of
the Fed's monetary tightening, he argues that Greenspan is
creating a self-fulfilling prophecy: because the Fed acts
scared of incipient inflation, the bond market gets scared, too.
This of course encourages the spread between long and short
interest rates to widen.  (It goes both ways: one reason
why Greenspan is scared of inflation is that the bond market
is scared!)

Also, there was a good cartoon in BUSINESS WEEK awhile back.
It shows a prisoner named "inflation" chained upside-down in
a dungeon. Entering is Alan Greenspan, dressed as the torturer,
complete with a whip, labelled "Federal Reserve." Saith
Greenspan: "Well, well, well... there's a *rumor* going around
that you're planning an escape!"

sincerely,

Jim Devine   BITNET: jndf@lmuacad    INTERNET: jdevine@xxxxxxxxxxxxxxx
Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA
310/338-2948 (off); 310/202-6546 (hm); FAX: 310/338-1950
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