Skip to main content.
January 26th, 2007

End the Federal Reserves Micromanaging the Business Cycle

When the economy is good, inflation rises then falls. There is no need for higher interest rates to slow the economy and inflation. The inflation we had was rising oil prices and increased demand for much needed supplies because of the strong worldwide economy. In a growing economy, coming out of the Clinton recession, its good for prices to rise to profitable levels for suppliers and to encourage more production.

At the beginning of a growing economic cycle its good to have rising prices and is a natural result. Suppliers might still be cutting back and have lowered prices to unprofitable levels when the economy was weak. Rising prices aren’t always dreaded “inflation” but rather a necessary market force that further increases production to meet rising demand as the economy enters a new growth era. Businesses see the demand and higher prices and quickly ramp up production. We are now in the faze of increasing production of needed supplies and that lowers inflation as the demand is met.

Oil is an example of increased world demand (because of the good economy) that resulted in increased prices. Now we see increasing supplies of oil, greater efficiencies and alternatives which lower the oil price as the higher demand is met. Those commodities that have the largest price increase spur the greatest investment to meet the demand.

The economic growth cycle includes changing prices to encourage production of needed supplies. It’s about time to end the Federal reserves micromanaging the business cycle.

Posted by admin in Economics, politics

No Comments »

This entry was posted on Friday, January 26th, 2007 at 6:57 pm and is filed under Economics, politics. You can follow any responses to this entry through the comments RSS 2.0 feed. You can leave a response, or trackback from your own site.

Leave a Reply

You must be logged in to post a comment.