A Helping Hand to Alan Greenspan and the Federal Reservegreenspun.com : LUSENET : Bill Parish : One Thread
The idea here is to provide helpful comments to the Federal Reserve Board.
-- Bill Parish (email@example.com), April 20, 2001
The Federal Reserve is making too many interest rate changes. Sadly, they raised rates when they should have instead focused on improving their data which would have had the same effect without needing to raise rates.
For example, I heavily pressured the Fed to disclose what was occurring at Microsoft in that they have usurped control over the money supply by using a pyramid scheme. All the Fed needed do was support the SEC is requiring that if a company takes a tax deduction for stock options as wages they would have to show this amount as a charge against earnings. This would have deflated Microsoft's pyramid and restored integrity to the technology sector as their earnings more accurately reflected results and their stock was deflated.
Instead, they raised rates and had a strong impact on the broader economy, creating false inflation. Now they are lowering rates but still not addressing the core problem.
In a related matter, the employment cost index, closely watched by the fed, still does not include stock option wages even though this can readily be accomplished. This is also introducing a huge distortion into the system and causing workers without options to demand higher wages in order to compete for goods and services with the paper pyramid of options led by microsoft.
Perhaps most interesting is that the tech industry was co-opted by Microsoft into not disclosing what is going on since options were widely issued. The surprising part is that their impact is totally differenct at Microsoft compared to Red Hat and other smaller firms with limited profits, if any. This was particularly ingenious of Microsoft but sadly has crushed the new economy.
Please see www.billparish.com for various reports on this topic, in particular the AOL report.
What do you think?
Best regards, Bill
-- Bill Parish (firstname.lastname@example.org), April 20, 2001.
Isn't it true that the Fed raised rates dramatically during the 1999-2000 period because of a falsely claimed "high-tech labor shortage?" Isn't it true that the Fed thought labor rates were rising quickly, since there was an illusion of a "tight" labor market for high-tech workers? Isn't it true that the Fed was misled by spinmeisters at the ITAA, the NSF, the AILA (American Immigration Lawyers Asso.), and other organizations with a vested interest in boosting the importation of H1-B foreign replacement workers? Isn't it true that real unemployment among high-tech workers is far higher than reported, but is disguised by such euphemisms as "early retirement" and "on the bench?"
-- Tom Nadeau (email@example.com), April 23, 2001.
Hello Tom. The Fed is only human and as Greenspan says they are using stale data. They need to fix the ECI (Employment Cost Index) measure of wage inflation to include stock option wages taxes as W-2 wages. This is the core of the challenge. They also need to hire more accountants and take an active interest in issues traditionally relegated to the SEC. For example, they should support various rules on derivatives, perhaps prohibiting companies from speculating on their own stocks as Microsoft did in the options markets. That is simple, sensible and can be done.
-- Bill Parish (firstname.lastname@example.org), April 24, 2001.
But Mr. Greenspan insisted that inflationary signs were "out there." He claimed that inflation was about ready to take off. It didn't. The reason he was misled in the upwards direction was not due to lack of accounting for stock-driven wage increases, because then he would have said inflation was *already here*. He was misled by false complaints of impending wage increases for white-collar workers. The false complaints were designed to fool the government into opening the floodgates for foreign replacement workers, leading to 200,000 high-tech layoffs every year for the past 3 years.
The fact is, wages relative to inflation are lower now than in 1988 for white-collar positions below executive level. We are in a massive disinflationary period because: 1. commodities are dirt-cheap 2. there is a huge surplus of white-collar workers who have been replaced by software 3. the remaining white-collar workers are rapidly being replaced by imported techies from the Third World
Remember that Y2K work was supposed to send salaries through the roof, but it didn't. Sure, companies moan and complain about high salaries, but this is for a tiny, tiny group of narrowly-skilled people. For the vast majority of white-collar workers, wages are stagnant. Companies are using imported replacement workers, real-time workforce adjustments (weekly/monthly layoffs, weekly/monthly hiring), and tight inventory control (via software & the Web) to cut costs. It will be several years before underlying costs catch up to this very effective regime of disinflationary tactics.
-- Tom Nadeau (email@example.com), April 25, 2001.