Tuesday, May 02, 2006

Unsound Reasoning at Fed

The Internet whispers with Thought that the Fed will again raise the base rate--now at 4.75%. Bernacke himself suggests it could go either way, only the monthly Governors's meeting will finally tell. Some are murmuring Yes, some No. This Author thinks the gentle Men and Women are reading Numbers, not Events.

Where is the Inflation push? The Answer is Energy.
Do Oil Companies and Utilities borrow very much? No.
Will raising the base rate affect Inflation very much? No.
What is the major force affecting Energy prices now? Speculation
How can Speculation be curtailed in the Energy markets? Raise Capital Gains taxation.

The Economy is faced with another Case of more Investment liquidity than sufficient Investment opportunity. The Response to such circumstances remains the nemisis of Conservative economic thought--higher Business taxes overall. Business has been trying to denude Labor of livelihood since the Reagan administrations. The pursuit of excessive Profit margins, though, can also be unproductive; engineering of multiplex Product supply to a insufficient Market bringing underutilization of Capital assets, with excess Pricing to supply the Profit margins necessary for maintained operation. The functionality expresses there should be less Capital, less Investment, greater utilization of existent Capital assets, use of less material resources, payment of Public debts, lowering of Government expenditures, and most of all: higher Business taxation. lgl

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