“My Two Cents”
By Andy Sutton

6/29/2006

I don't even know where to begin today. It's as if over-stimulation has robbed me of more than a minute's pondering on any one particular item. This is going to be a potpourri column; a veritable cacophony of tidbits straight from my very own comfy chair aboard the unsinkable USS Dollaris.

As a former scientist, I have heard my share about cause and effect. equal and opposite reactions, highs and lows, and equilibrium within systems. We have a system all right. I could use a few other adjectives to describe it, but for now I'll try to stick to the point.

Headline #1 - Fed raises Funds Rate 25 basis points; forward looking statement softens.

Most people I talk to about such things have been wondering what the Federal Reserve's intentions are with regard to inflation, the economy and the US Dollar. As of 2:15 today, we may be closer to an answer, although a there is enough doublespeak in their policy statement to make George Orwell proud. The Fed, as usual, has given itself plenty of wiggle room. There is either a motive here, or else they are completely clueless and still trying to learn how to properly drive a car using only the rear-view mirror. In either case, the market got the 25 basis point hike it expected, and a somewhat limp-wristed reference to future firming, which indicates to many that the Fed may indeed be done. Done what ? Inflation is running rampant by any real measures except the myopic ones the government publishes. If the Fed were serious, it would wring every drop of consumer credit from the system and not put it back until this economy grew honestly on production and savings. But alas, it appears its business as usual.

Headline #2 - Paulson confirmed as Treasury Secretary

Hank Paulson earned confirmation as the new Secretary of the Treasury. He answered many questions, but in effect, said nothing. He made it very clear that with regard to the trade deficit and the dollar that it will be business as usual. Let the folks at the Fed figure out how to inflate the deficits away, but we're not going to talk about it. Paulson did a fine job of not riling the markets this week during his hearings. After all, he's a Wall Street executive and is just the type of appointee who can maintain the status quo, something John Snow had a problem doing hence his prompt dismissal.

Headline #3 - Google Aims to Speed the Checkout Line

Google wants to provide an online checkout service to facilitate Internet purchases. Ok, what does this have to do with anything? I read curiously until I saw the following quote from Google Exec. Eric Schmidt:

"The goal here is to make it be one nanosecond from the time the customer decides to buy to the time the transaction is complete and the product is on the way," Mr. Schmidt said.

I see. Instant gratification on steroids. And we thought only baseball had a problem with steroids? This gets to the heart of the matter. Americans now rely on loose monetary policy, credit and instant gratification. The Fed couldn't tighten too much even if it wanted to. There would be a riot at every Hummer dealership and Best Buy in the country the minute we had to stop buying. America would turn into a giant Betty Ford clinic of people strung out on largesse.

But the FED isn't interested in tightening, so rest easy America. You will continue to trade your valuable labor and effort for dollars of decreasing value. Which some say is a good thing since it will make American products more attractive versus their foreign counterparts. Test this theory for me the next time you go to a WalMart, Target or Costco. Find something made here. After all, its business as usual.

Andy Sutton holds an MBA in Economics from Moravian College and is a member of Omicron Delta Epsilon International Honor Society in Economics.

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