Lyle Gramley
Lyle Gramley
Lyle Elden Gramleywas an American economist. Involved in economic policymaking during the Carter and Reagan presidencies, he served on the Council of Economic Advisers from 1977 to 1980, and on the Federal Reserve Board of Governors from 1980 to 1985...
lower mortgage rates since today
Mortgage rates haven't been significantly lower than the rates we have today since the 1960s.
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There are a lot of worries circulating around about deflation, ... What the Fed is doing is saying we don't need to worry. If deflation happens, they will counter aggressively, and they have the tools to do so.
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This time, we're starting with an inflation rate that's too low and heading lower, ... What that means is the Fed will sit still until such time as it sees inflation start turning up -- which might not happen until late 2004 or early 2005.
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Financial markets are going to become uneasy about this because Alan Greenspan has become an oracle,
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Then the Fed would be in a very tough spot,
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It's entirely possible you could repeal tax cuts without injuring the economy if you did it carefully, over a period of time, while offsetting it in part by increasing expenditures you knew were coming anyway or thought desirable. But you couldn't simply remove the tax cuts altogether right away and avoid significant negative effects to the economy.
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We still face a longer-range deficit problem and that will be exacerbated by increases in Medicare and Social Security payments, ... It would be helpful to bring our budget deficit down longer-term. I worry more about that than this temporary increase in the deficit.
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Anyone who sits at that table knows that if the Fed puts his head up in the midst of an election campaign when it's not necessary to do so, that would be a rather foolish thing to do. You don't want people shooting at you unnecessarily - you'd rather live to fight another day.
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The bottom line is that their principal concern is that inflation might go lower, so we'll get the same kind of statement we got last time.
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This is a situation where the uncertainties have suddenly become huge. If all the concerns translate into much lower personal spending, then the economy could falter.
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This is an economy that's been struggling to keep its head above water for some time, so this kind of a rise in long-term interest rates is not welcome at this point,
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I think the Fed opened the door for a half-percentage-point increase in August, if it's needed,
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I think the Fed needs to worry about the possibility it's flirting with deflation if it lets this go too far. When nominal rates get down toward zero, the Fed starts running out of ammunition.
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He wondered what I was doing and what he might do. I replied that when he leaves government service he's worth an enormous amount of money.