[FoRK] Fed leaves rate unchanged, says "hiring has lagged..."

Bill Stoddard bill at wstoddard.com
Tue Mar 16 13:28:00 PST 2004


jbone at place.org wrote:

> 
> Bit of pre-emptive commentary.  Rather than yesterday's debugging of  
> the perenniel JR argument from "authority" --- the interesting bits  
> lurking in the job debacle story and the interesting discussion to have  
> ahead of the Fed were as follows.  The forecasts probably weren't  
> really just voodoo or wishful thinking on the part of the forecasters,  
> despite my cheap shot.  In fact, the methodology for the forecasts was  
> sound;  it's based purely on looking at the trend line and historical  
> performance.  The problem is, something is wrong with the fundamentals.
> 
> By analogy to the bubble collapse...  purely technical analysis-based  
> traders made bank during the boom, but got their asses handed to them  
> on a platter when things collapsed.  Reason being:  technical analysis  
> works sometimes, and fundamental analysis works at other times.   
> Technical analysis doesn't protect you when the market has artificially  
> inflated prices and everything comes crashing down at once due to weak  
> fundamentals.
> 
> The point is, there are increasing signs that something --- not clear  
> what, but something --- is changing in the fundamentals of our economy.  

Speculation anyone? A couple of thoughts...
1. Productivity growth is being realized because companies are spending time to digest their earlier 
technology purchases (thinking IT in particular here). All of the low hanging IT 'fruit' has been picked (ala 
HBR "Does IT Matter"). Companies are not investing in new IT and their best tech people (those that generally 
spend their time working on the 'next big thing') are working to increase operating efficiencies by 
intelligently exploiting their last gen IT. 80/20 rule is bearing down on IT hard; it will be increasingly 
expensive to save those last few pennies. Incremental improvements to existing state-of-the-art IT will not 
provide big improvements in a companies competativeness.

2. Most of us can acquire most all the manufactured goods we desire/want. maybe not the exact model/make we'd 
prefer, but something functionally sufficient for the task at hand. Nothing that is manufactured will have a 
significant markup over production costs for very long due to productivity gains in manufacturing.

Production is 'catching up' to consumption and there is a limit to how much we can (or more importantly 
'want') to consume.  What does this mean in a capitalist economy?

Bill



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