“The Sphinx”: Alan Greenspan. Greenspan’s March 22, 2005 Federal Open Market Committee Statement Raising Interest Rate from 2.5% to 2.75 % To Control

April 5, 2006 by
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On March 22, 2005 in his statement in behalf of the FOMC, Chairman Alan Greenspan said the need to raise interest rates was caused by inflationary pressures in the economy. The alleged reasons was to control pricing power of sellers, which was increasing. What sellers? Does he mean all sellers or just the sellers of oil? And exactly why is their ability to raise prices increasing?
He also said economic production was growing robustly and the effect of oil price increases on the economy has been controlled. This is an interesting statement because controlled gasoline prices have risen to about $2.50 a gallon for the cheapest grade and since we are moving into the highest demand period for gasoline, summer prices can be expected to go higher.

Indexed for inflation, prices for gasoline reached just over $3.00 a gallon during the 1973 oil shock. Experts say that the impact of oil price increases has been lessened on the economy so that there is less of a one to one ratio between oil price increases and inflation in our economy. However this ratio appears to still be in place as regards oil price prices and the cost of gasoline. This cost hits almost every American family directly in the wallet.

Greenspan Must Walk Or He Is Raising Interest Rates To Be In A Position to Lower Them When Things Really Get Nasty.

Greenspan must walk to work or ride in a limousine provided by the Federal Reserve System while most Americans commute at their own expense in automobiles. The average citizen feels the price increases in oil as reflected in the price of gasoline almost immediately. Also those many Americans who buy heating oil or Airplane tickets notice price changes and surcharges immediately. The decision to raise interest rates by the FMOC will increase home mortgages payments and the cost of other consumer durables that are financed including cars and big ticket household items. This will slow consumer refinancing and consumer purchasing which leads to business failure and unemployment..

The economy was propped up by consumer spending when interest rates were lowered and homeowners found they could refinance their houses at lower rates and spend the equity (read as savings) on consumer items. This spending of the real savings of the American people, much of which went to buy foreign produced goods (like cars), while our own manufacturing industry has left the country for cheaper labor appears to indicate that we are living in a fools paradise. If consumer spending powered by low interest rates is curtailed then what of the repercussions to the larger economy if interest rates are raised? If consumer spending decreases won’t sellers sales and profits decrease also.
Which seems to indicate that FOMC policy will more likely lead to recession or worse then Greenspan will have to lower interest rates again.

The Root Cause Of Economic Problems: The Bush Administration.
Of course Greenspan has not addressed the root causes of this perceived specter
of inflation. They are the huge tax cuts by the Bush Administration, which caused deficit
spending along with the additional spending caused by the war in Iraq, which benefits
the Military Industrial Complex. President Eisenhower warned of the dangers of a
Military Industrial Complex in his final speech when he left office in 1960. It now seems
his warnings have come to fruition. Who benefits financially from the Iraq War?
Industrial contractors? Obviously. Will American interests in the Middle East benefit.
Yes, Saudi Arabia, our most powerful economic ally in the region wanted this war to
eliminate the military threat posed by Saddam Hussein. He could have easily invaded the
Kingdom in Gulf War I and destroyed the oilfields there. In such an event with the loss
of Saudi oil would the United States have been able to respond in order to protect its
interests? Yes, but at great damage to our economy. Oil would have to be rationed with
most of it going to the military. Thus if the Saudi oilfields are incapacitated there will be
worldwide recession. While we get about 25% or less of our oil from Saudi Arabia most
of the other industrialized economies of the First World are dependent in some degree on
Saudi oil. The Saudi’s set the market price by increasing or decreasing oil production
to stabilize the world market and they do it in dollars.

Bush’s Policies Are The Root Cause Of The Inflation that Greenspan And The FMOC Perceives. Our Mid-East Policy has Been Short Sighted Since At Least World War II.

The question is could Saddam Hussein be contained by diplomacy in the first place? He was well known to Bush I who was head of the CIA and who, who financed, and may have induced the Iraq-Iran war in the Eighties. Then there was the Gulf War and the subsequent assassination attempt on Bush I in Kuwait. What was that about? Did Saddam think he had been promised or due the Shat al-Arab region of Iran for attacking Iran with our assistance after they got rid of our ally the Shah and when he failed did he think that Bush the elder would stand by and let him annex Kuwait as a consolation prize. Iraq has historic claims to both areas.

The Soviet Union Ceased To Be A World Power.
When The Soviet Union Ceased To Be A World Power this led to the perception of Bush II and his Neocons that American power was unopposed in the world and could be more forcefully used in the Mid East starting with Saddam Hussein. Now it looks like Iran and its ally Syria will have to be dealt with. Hopefully it will be in some way short of military action. If Iran develops a deliverable bomb military action may be out for the U.S. in the region. Then will Saudi Arabia, which controls the world price of oil, come within the sphere of influence of Iran? Unthinkable as things now stand.

All this costs money. Bush’s policy of cutting taxes when there was no need to was greatest mistake of his administration. The continuing deficits both in government spending and import- export imbalance because of consumer spending are the cause of the dollars decline in value. World oil prices are fixed in terms of dollars and if dollars are worth less because of our budget deficits and trade imbalance the price of oil in terms of dollars is rising. This is the cause of inflationary pressure. The Bush administration is spending far more than it is taking in and we as a people are spending more than we produce.

As long as Bush is in office we will have powerful inflationary forces at work because of his policies and that translates into higher prices for average people, greater unemployment and more wealth transference to Bush and his friends especially those that own oil and gas still in the ground or are part of the Military Industrial Complex.

Greenspan Is Unwilling To Call A Spade A Spade. Nero Fiddled While Rome Burned And his Ministers Were Afraid To Challenge Him. Sound Familiar.
The Sphinx merely tightens the screws on the economy to the detriment to society in general and the average working person in particular and says nothing about the root policies causing this ominous but foreseeable blow to the economy and the lives of the average person. Someone ought to send Bush a fiddle so he can see himself with more historical perspective

On March 22, 2005 in his statement in behalf of the FOMC, Chairman Alan Greenspan said the need to raise interest rates was caused by inflationary pressures in the economy. The alleged reasons was to control pricing power of sellers, which was increasing. What sellers? Does he mean all sellers or just the sellers of oil? And exactly why is their ability to raise prices increasing?
He also said economic production was growing robustly and the effect of oil price increases on the economy has been controlled. This is an interesting statement because controlled gasoline prices have risen to about $2.50 a gallon for the cheapest grade and since we are moving into the highest demand period for gasoline, summer prices can be expected to go higher.

Indexed for inflation, prices for gasoline reached just over $3.00 a gallon during the 1973 oil shock. Experts say that the impact of oil price increases has been lessened on the economy so that there is less of a one to one ratio between oil price increases and inflation in our economy. However this ratio appears to still in place as regards oil price prices and the cost of gasoline. This cost hits almost every American family directly in the wallet.

Greenspan Must Walk Or He Is Raising Interest Rates To Be In A Position to Lower Them When things Really Get Nasty.
Greenspan must walk to work or ride in a limousine provided by the Federal Reserve System while most Americans commute at their own expense in automobiles. The average citizen feels the price increases in oil as reflected in the price of gasoline almost immediately. Also those many Americans who buy heating oil or Airplane tickets notice price changes and surcharges immediately. The decision to raise interest rates by the FMOC will increase home mortgages payments and the cost of other consumer durables that are financed including cars and big ticket household items. This will slow consumer refinancing and consumer purchasing which leads to business failure and unemployment..

The economy was propped up by consumer spending when interest rates were lowered and homeowners found they could refinance their houses at lower rates and spend the equity (read as savings) on consumer items. This spending of the real savings of the American people much of which went to buy foreign produced goods (like cars) while our own manufacturing industry has left the country for cheaper labor appears to indicate that we are living in a fools paradise. If consumer spending powered by low interest rates is curtailed then what of the repercussions to the larger economy if interest rates are raised? If consumer spending decreases won’t sellers sales and profits decrease also.
Which seems to indicate that FOMC policy will more likely lead to recession or worse then Greenspan will have to lower interest rates again.

The Root Cause Of Economic Problems: The Bush Administration.
Of course Greenspan has not addressed the root causes of this perceived specter
of inflation. They are the huge tax cuts by the Bush Administration, which caused deficit
spending along with the additional spending caused by the war in Iraq, which benefits
the Military Industrial Complex. President Eisenhower warned of the dangers of a
Military Industrial Complex in his final speech when he left office in 1960. It now seems
his warnings have come to fruition. Who benefits financially from the Iraq War?
Industrial contractors? Obviously. Will American interests in the Middle East benefit.
Yes, Saudi Arabia, our most powerful economic ally in the region wanted this war to
eliminate the military threat posed by Saddam Hussein. He could have easily invaded the
Kingdom in Gulf War I and destroyed the oilfields there. In such an event with the loss
of Saudi oil would the United States have been able to respond in order to protect its
interests? Yes, but at great damage to our economy. Oil would have to be rationed with
most of it going to the military. Thus if the Saudi oilfields are incapacitated there will be
worldwide recession. While we get about 25% or less of our oil from Saudi Arabia most
of the other industrialized economies of the First World are dependent in some degree on
Saudi oil. And the Saudi’s set the market price by increasing or decreasing oil production
to stabilize the world market and they do it in dollars.

Bush’s Policies Are The Root Cause Of The Inflation that Greenspan And The FMOC Perceives. Our Mid-East Policy has Been Short Sighted Since At Least World War II.

The question is could Saddam Hussein be contained by diplomacy in the first place? He was well known to Bush I who was head of the CIA and who, who financed, and may have induced the Iraq-Iran war in the Eighties. Then there was the Gulf War and the subsequent assassination attempt on Bush I in Kuwait. What was that about? Did Saddam think he had been promised or due the Shat al-Arab region of Iran for attacking Iran with our assistance after they got rid of our ally the Shah and when he failed did he think that Bush the elder would stand by and let him annex Kuwait as a consolation prize. Iraq has historic claims to both areas.

The Soviet Union Ceased To Be A World Power.
When The Soviet Union Ceased To Be A World Power this led to the perception of Bush II and his Neocons that American power was unopposed in the world and could be more forcefully used in the Mid East starting with Saddam Hussein. Now it looks like Iran and its ally Syria will have to be dealt with. Hopefully it will be in some way short of military action. If Iran develops a deliverable bomb military action may out for the U.S. in the region. Then will Saudi Arabia, which controls the world price of oil, come within the sphere of influence of Iran? Unthinkable as things now stand.

All this costs money. Bush’s policy of cutting taxes when there was no need to was greatest mistake of his administration. The continuing deficits both in government spending and import- export imbalance because of consumer spending are the cause of the dollars decline in value. World oil prices are fixed in terms of dollars and if dollars are worth less because of our budget deficits and trade imbalance the price of oil in terms of dollars is rising. This is the cause of inflationary pressure. The Bush administration is spending far more than it is taking in and we as a people are spending more than we produce.

As long as Bush is in office we will have powerful inflationary forces at work because of his policies and that translates into higher prices for average people, greater unemployment and more wealth transference to Bush and his friends especially those that own oil and gas still in the ground or are part of the Military Industrial Complex.

Greenspan Is Unwilling To Call A Spade A Spade. Nero Fiddled While Rome Burned And his Ministers Were Afraid To Challenge Him. Sound Familiar.
The Sphinx merely tightens the screws on the economy to the detriment to society in general and the average working person in particular and says nothing about the root policies causing this ominous but foreseeable blow to the economy and the lives of the average person. Someone ought to send Bush a fiddle so he can see himself with more historical perspective

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