🚀 go-pugleaf

On 28 Jun 2005 12:08:43 -0700, "Zerge" <zerge@hotmail.com> wrote:

>
>
>arminius wrote:
>> "Lets Roll" <letsroll@meet-me-in-hell.com> wrote in message
>> news:pT5ve.8896$jX6.5374@newsread2.news.pas.earthlink.net...
>> > 16 February 2005
>> >
>> >
>> > Text: Greenspan Urges U.S. Action on Long-term Economic Challenges
>> >
>> > Calls for improvements in education, reform of benefits for elderly
>> >
>> > As the U.S. economic expansion continues, policy-makers must address
>> > long-term problems such as the composition of the work force and the
>> federal
>> > budget deficit to ensure that the economy remains flexible and
>> competitive,
>> > Federal Reserve Chairman Alan Greenspan says.
>> >
>> > Testifying February 16 before the Senate Banking Committee, the head of
>> the
>> > U.S. central bank gave an upbeat assessment of the U.S. economy and its
>> > near-term potential.
>> >
>> > "All told, the economy seems to have entered 2005 expanding at a
>> reasonably
>> > good pace, with inflation and inflation expectations well-anchored," he
>> said
>> > delivering the bank's semiannual monetary report to Congress.
>> >
>> > However, he said that "people experiencing long periods of relative
>> > stability are prone to excess" and cautioned against complacency given the
>> > economic challenges that will confront U.S. policymakers in coming years.
>> >
>> > Greenspan cited the composition of U.S. work force as one of those
>> problems.
>> > He said that technology advances and global competition have diminished
>> > demand for less skilled workers and increased demand for highly skilled
>> > workers in the United States and other developed countries. However, the
>> > supply of the latter in the U.S. economy has failed to keep up with a
>> > continued rise in demand, he said.
>> >
>> > Greenspan called for strengthening elementary and secondary education to
>> > prevent a wage gap between skilled and less skilled workers from widening
>> > and fueling "resentment and political polarization." He said that such
>> > developments could lead to political clashes and misguided economic
>> policies
>> > and leave the U.S. economy unprepared to compete effectively in the modern
>>
>> > global marketplace.
>> >
>> > Greenspan said that an adjustment of the U.S. current account deficit is
>> > another challenge. Because an increase in net national savings is central
>> to
>> > an orderly adjustment, he said that restoring fiscal discipline is
>> > imperative.
>> >
>> > The current account balance is the broadest measure of a country's
>> > transactions with the rest of the world.
>> >
>> > Greenspan reaffirmed his view that public pension and related health care
>> > benefits for the elderly will strain the resources of younger workers when
>> > large numbers of U.S. workers born after World War II start retiring. He
>> > said the sheer number of potential retirees suggests that the problem
>> should
>> > be addressed sooner rather than later. He cautioned that interest rates on
>> > government debt could be affected in the long run if the problem is not
>> > dealt with soon enough.
>> >
>> > President Bush has urged a reform of Social Security, the U.S. public
>> > pension system, that would allow 55-year-old and younger workers to
>> convert
>> > part of their mandatory Social Security contributions into private
>> > investment accounts. Although the details of the plan are not yet known,
>> the
>> > impact of such a change on pension incomes, Social Security and the
>> federal
>> > budget is being hotly debated.
>> >
>> > During the hearing, Greenspan said in response to a question that he
>> > supports the central concept of the president's plan but urged a cautious
>> > approach to its implementation to diminish the risk of destabilizing
>> > financial markets.
>> >
>> > "I think it's a good thing to do over the longer run," he said. "[But] if
>> > you are going to move to private accounts, which I approve of, you have to
>> > do it in a cautious, gradual way."
>> >
>> > Greenspan said he believes that long-term U.S. economic challenges will
>> > ultimately be met and resolved.
>> >
>> > Following is the text of Greenspan's testimony as prepared for delivery:
>> >
>> > (begin text)
>> >
>> > Federal Reserve Board
>> >
>> > Testimony of Chairman Alan Greenspan
>> > Federal Reserve Board's semiannual Monetary Policy Report to the Congress
>> > Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate
>> > February 16, 2005
>> >
>> > Mr. Chairman and members of the Committee, I am pleased to be here today
>> to
>> > present the Federal Reserve's Monetary Policy Report to the Congress. In
>> the
>> > seven months since I last testified before this Committee, the U.S.
>> economic
>> > expansion has firmed, overall inflation has subsided, and core inflation
>> has
>> > remained low.
>> >
>> > Over the first half of 2004, the available information increasingly
>> > suggested that the economic expansion was becoming less fragile and that
>> the
>> > risk of an undesirable decline in inflation had greatly diminished. Toward
>> > midyear, the Federal Reserve came to the judgment that the extraordinary
>> > degree of policy accommodation that had been in place since the middle of
>> > 2003 was no longer warranted and, in the announcement released at the
>> > conclusion of our May meeting, signaled that a firming of policy was
>> likely.
>> > The Federal Open Market Committee began to raise the federal funds rate at
>> > its June meeting, and the announcement following that meeting indicated
>> the
>> > need for further, albeit gradual, withdrawal of monetary policy stimulus.
>> >
>> > Around the same time, incoming data suggested a lull in activity as the
>> > economy absorbed the impact of higher energy prices. Much as had been
>> > expected, this soft patch proved to be short-lived. Accordingly, the
>> Federal
>> > Reserve has followed the June policy move with similar actions at each
>> > meeting since then, including our most recent meeting earlier this month.
>> > The cumulative removal of policy accommodation to date has significantly
>> > raised measures of the real federal funds rate, but by most measures, it
>> > remains fairly low.
>> >
>> > The evidence broadly supports the view that economic fundamentals have
>> > steadied. Consumer spending has been well maintained over recent months,
>> > buoyed by continued growth in disposable personal income, gains in net
>> > worth, and accommodative conditions in credit markets. Households have
>> > recorded a modest improvement in their financial position over this
>> period,
>> > to the betterment of many indicators of credit quality. Low interest rates
>> > and rising incomes have contributed to a decline in the aggregate
>> household
>> > financial obligation ratio, and delinquency and charge-off rates on
>> various
>> > categories of consumer loans have stayed at low levels.
>> >
>> > The sizable gains in consumer spending of recent years have been
>> accompanied
>> > by a drop in the personal saving rate to an average of only 1 percent over
>> > 2004 -- a very low figure relative to the nearly 7 percent rate averaged
>> > over the previous three decades. Among the factors contributing to the
>> > strength of spending and the decline in saving have been developments in
>> > housing markets and home finance that have spurred rising household wealth
>> > and allowed greater access to that wealth. The rapid rise in home prices
>> > over the past several years has provided households with considerable
>> > capital gains. Moreover, a significant increase in the rate of
>> single-family
>> > home turnover has meant that many consumers have been able to realize
>> gains
>> > from the sale of their homes. To be sure, such capital gains, largely
>> > realized through an increase in mortgage debt on the home, do not increase
>> > the pool of national savings available to finance new capital investment.
>> > But from the perspective of an individual household, cash realized from
>> > capital gains has the same spending power as cash from any other source.
>> >
>> > More broadly, rising home prices along with higher equity prices have
>> > outpaced the rise in household, largely mortgage, debt and have pushed up
>> > household net worth to about 5-1/2 times disposable income by the end of
>> > last year. Although the ratio of net worth to income is well below the
>> peak
>> > attained in 1999, it remains above the long-term historical average. These
>> > gains in net worth help to explain why households in the aggregate do not
>> > appear uncomfortable with their financial position even though their
>> > reported personal saving rate is negligible.
>> >
>> > Of course, household net worth may not continue to rise relative to
>> income,
>> > and some reversal in that ratio is not out of the question. If that were
>> to
>> > occur, households would probably perceive the need to save more out of
>> > current income; the personal saving rate would accordingly rise, and
>> > consumer spending would slow.
>> >
>> > But while household spending may well play a smaller role in the expansion
>> > going forward, business executives apparently have become somewhat more
>> > optimistic in recent months. Capital spending and corporate borrowing have
>> > firmed noticeably, but some of the latter may have been directed to
>> finance
>> > the recent backup in inventories. Mergers and acquisitions, though, have
>> > clearly perked up.
>> >
>> > Even in the current much-improved environment, however, some caution among
>> > business executives remains. Although capital investment has been
>> advancing
>> > at a reasonably good pace, it has nonetheless lagged the exceptional rise
>> in
>> > profits and internal cash flow. This is most unusual; it took a deep
>> > recession to produce the last such configuration in 1975. The lingering
>> > caution evident in capital spending decisions has also been manifest in
>> > less-aggressive hiring by businesses. In contrast to the typical pattern
>> > early in previous business-cycle recoveries, firms have appeared reluctant
>> > to take on new workers and have remained focused on cost containment.
>> >
>> > As opposed to the lingering hesitancy among business executives,
>> > participants in financial markets seem very confident about the future
>> and,
>> > judging by the exceptionally low level of risk spreads in credit markets,
>> > quite willing to bear risk. This apparent disparity in sentiment between
>> > business people and market participants could reflect the heightened
>> > additional concerns of business executives about potential legal
>> liabilities
>> > rather than a fundamentally different assessment of macroeconomic risks.
>> >
>> > Turning to the outlook for costs and prices, productivity developments
>> will
>> > likely play a key role. The growth of output per hour slowed over the past
>> > half year, giving a boost to unit labor costs after two years of declines.
>> > Going forward, the implications for inflation will be influenced by the
>> > extent and persistence of any slowdown in productivity. A lower rate of
>> > productivity growth in the context of relatively stable increases in
>> average
>> > hourly compensation has led to slightly more rapid growth in unit labor
>> > costs. Whether inflation actually rises in the wake of slowing
>> productivity
>> > growth, however, will depend on the rate of growth of labor compensation
>> and
>> > the ability and willingness of firms to pass on higher costs to their
>> > customers. That, in turn, will depend on the degree of utilization of
>> > resources and how monetary policymakers respond. To date, with profit
>> > margins already high, competitive pressures have tended to limit the
>> extent
>> > to which cost pressures have been reflected in higher prices.
>> >
>> > Productivity is notoriously difficult to predict. Neither the large surge
>> in
>> > output per hour from the first quarter of 2003 to the second quarter of
>> > 2004, nor the more recent moderation was easy to anticipate. It seems
>> likely
>> > that these swings reflected delayed efficiency gains from the capital
>> goods
>> > boom of the 1990s. Throughout the first half of last year, businesses were
>> > able to meet increasing orders with management efficiencies rather than
>> new
>> > hires. But conceivably the backlog of untapped total efficiencies has run
>> > low, requiring new hires. Indeed, new hires as a percent of employment
>> rose
>> > in the fourth quarter of last year to the highest level since the second
>> > quarter of 2001.
>> >
>> > There is little question that the potential remains for large advances in
>> > productivity from further applications of existing knowledge, and insights
>> > into applications not even now contemplated doubtless will emerge in the
>> > years ahead. However, we have scant ability to infer the pace at which
>> such
>> > gains will play out and, therefore, their implications for the growth of
>> > productivity over the longer run. It is, of course, the rate of change of
>> > productivity over time, and not its level, that influences the persistent
>> > changes in unit labor costs and hence the rate of inflation.
>> >
>> > The inflation outlook will also be shaped by developments affecting the
>> > exchange value of the dollar and oil prices. Although the dollar has been
>> > declining since early 2002, exporters to the United States apparently have
>> > held dollar prices relatively steady to preserve their market share,
>> > effectively choosing to absorb the decline in the dollar by accepting a
>> > reduction in their profit margins. However, the recent somewhat quickened
>> > pace of increases in U.S. import prices suggests that profit margins of
>> > exporters to the United States have contracted to the point where the
>> > foreign shippers may exhibit only limited tolerance for additional
>> > reductions in margins should the dollar decline further.
>> >
>> > The sharp rise in oil prices over the past year has no doubt boosted
>> firms'
>> > costs and may have weighed on production, particularly given the sizable
>> > permanent component of oil price increases suggested by distant-horizon
>> oil
>> > futures contracts. However, the share of total business expenses
>> > attributable to energy costs has declined appreciably over the past thirty
>> > years, which has helped to buffer profits and the economy more generally
>> > from the adverse effect of high oil and natural gas prices. Still,
>> although
>> > the aggregate effect may be modest, we must recognize that some sectors of
>> > the economy and regions of the country have been hit hard by the increase
>> in
>> > energy costs, especially over the past year.
>> >
>> > Despite the combination of somewhat slower growth of productivity in
>> recent
>> > quarters, higher energy prices, and a decline in the exchange rate for the
>> > dollar, core measures of consumer prices have registered only modest
>> > increases. The core PCE and CPI measures, for example, climbed about 1-1/4
>> > and 2 percent, respectively, at an annual rate over the second half of
>> last
>> > year.
>> >
>> > All told, the economy seems to have entered 2005 expanding at a reasonably
>> > good pace, with inflation and inflation expectations well anchored. On the
>> > whole, financial markets appear to share this view. In particular, a broad
>> > array of financial indicators convey a pervasive sense of confidence among
>> > investors and an associated greater willingness to bear risk than is yet
>> > evident among business managers.
>> >
>> > Both realized and option-implied measures of uncertainty in equity and
>> > fixed-income markets have declined markedly over recent months to quite
>> low
>> > levels. Credit spreads, read from corporate bond yields and credit default
>> > swap premiums, have continued to narrow amid widespread signs of an
>> > improvement in corporate credit quality, including notable drops in
>> > corporate bond defaults and debt ratings downgrades. Moreover, recent
>> > surveys suggest that bank lending officers have further eased standards
>> and
>> > terms on business loans, and anecdotal reports suggest that securities
>> > dealers and other market-makers appear quite willing to commit capital in
>> > providing market liquidity.
>> >
>> > In this environment, long-term interest rates have trended lower in recent
>> > months even as the Federal Reserve has raised the level of the target
>> > federal funds rate by 150 basis points. This development contrasts with
>> most
>> > experience, which suggests that, other things being equal, increasing
>> > short-term interest rates are normally accompanied by a rise in
>> longer-term
>> > yields. The simple mathematics of the yield curve governs the relationship
>> > between short- and long-term interest rates. Ten-year yields, for example,
>> > can be thought of as an average of ten consecutive one-year forward rates.
>> A
>> > rise in the first-year forward rate, which correlates closely with the
>> > federal funds rate, would increase the yield on ten-year U.S. Treasury
>> notes
>> > even if the more-distant forward rates remain unchanged. Historically,
>> > though, even these distant forward rates have tended to rise in
>> association
>> > with monetary policy tightening.
>> >
>> > In the current episode, however, the more-distant forward rates declined
>> at
>> > the same time that short-term rates were rising. Indeed, the tenth-year
>> > tranche, which yielded 6-1/2 percent last June, is now at about 5-1/4
>> > percent. During the same period, comparable real forward rates derived
>> from
>> > quotes on Treasury inflation-indexed debt fell significantly as well,
>> > suggesting that only a portion of the decline in nominal forward rates in
>> > distant tranches is attributable to a drop in long-term inflation
>> > expectations.
>> >
>> > Some analysts have worried that the dip in forward real interest rates
>> since
>> > last June may indicate that market participants have marked down their
>> view
>> > of economic growth going forward, perhaps because of the rise in oil
>> prices.
>> > But this interpretation does not mesh seamlessly with the rise in stock
>> > prices and the narrowing of credit spreads observed over the same
>> interval.
>> > Others have emphasized the subdued overall business demand for credit in
>> the
>> > United States and the apparent eagerness of lenders, including foreign
>> > investors, to provide financing. In particular, heavy purchases of
>> > longer-term Treasury securities by foreign central banks have often been
>> > cited as a factor boosting bond prices and pulling down longer-term
>> yields.
>> > Thirty-year fixed-rate mortgage rates have dropped to a level only a
>> little
>> > higher than the record lows touched in 2003 and, as a consequence, the
>> > estimated average duration of outstanding mortgage-backed securities has
>> > shortened appreciably over recent months. Attempts by mortgage investors
>> to
>> > offset this decline in duration by purchasing longer-term securities may
>> be
>> > yet another contributor to the recent downward pressure on longer-term
>> > yields.
>> >
>> > But we should be careful in endeavoring to account for the decline in
>> > long-term interest rates by adverting to technical factors in the United
>> > States alone because yields and risk spreads have narrowed globally. The
>> > German ten-year Bund rate, for example, has declined from 4-1/4 percent
>> last
>> > June to current levels of 3-1/2 percent. And spreads of yields on bonds
>> > issued by emerging-market nations over U.S. Treasury yields have declined
>> to
>> > very low levels.
>> >
>> > There is little doubt that, with the breakup of the Soviet Union and the
>> > integration of China and India into the global trading market, more of the
>> > world's productive capacity is being tapped to satisfy global demands for
>> > goods and services. Concurrently, greater integration of financial markets
>> > has meant that a larger share of the world's pool of savings is being
>> > deployed in cross-border financing of investment. The favorable inflation
>> > performance across a broad range of countries resulting from enlarged
>> global
>> > goods, services and financial capacity has doubtless contributed to
>> > expectations of lower inflation in the years ahead and lower inflation
>> risk
>> > premiums. But none of this is new and hence it is difficult to attribute
>> the
>> > long-term interest rate declines of the last nine months to glacially
>> > increasing globalization. For the moment, the broadly unanticipated
>> behavior
>> > of world bond markets remains a conundrum. Bond price movements may be a
>> > short-term aberration, but it will be some time before we are able to
>> better
>> > judge the forces underlying recent experience.
>> >
>> > This is but one of many uncertainties that will confront world
>> policymakers.
>> > Over the past two decades, the industrial world has fended off two severe
>> > stock market corrections, a major financial crisis in developing nations,
>> > corporate scandals, and, of course, the tragedy of September 11, 2001. Yet
>> > overall economic activity experienced only modest difficulties. In the
>> > United States, only five quarters in the past twenty years exhibited
>> > declines in GDP, and those declines were small. Thus, it is not altogether
>> > unexpected or irrational that participants in the world marketplace would
>> > project more of the same going forward.
>> >
>> > Yet history cautions that people experiencing long periods of relative
>> > stability are prone to excess. We must thus remain vigilant against
>> > complacency, especially since several important economic challenges
>> confront
>> > policymakers in the years ahead.
>> >
>> > Prominent among these challenges in the United States is the pressing need
>> > to maintain the flexibility of our economic and financial system. This
>> will
>> > be essential if we are to address our current account deficit without
>> > significant disruption. Besides market pressures, which appear poised to
>> > stabilize and over the longer run possibly to decrease the U.S. current
>> > account deficit and its attendant financing requirements, some forces in
>> the
>> > domestic U.S. economy seem about to head in the same direction. Central to
>> > that adjustment must be an increase in net national saving. This serves to
>> > underscore the imperative to restore fiscal discipline.
>> >
>> > Beyond the near term, benefits promised to a burgeoning retirement-age
>> > population under mandatory entitlement programs, most notably Social
>> > Security and Medicare, threaten to strain the resources of the working-age
>> > population in the years ahead. Real progress on these issues will
>> > unavoidably entail many difficult choices. But the demographics are
>> > inexorable, and call for action before the leading edge of baby boomer
>> > retirement becomes evident in 2008. This is especially the case because
>> > longer-term problems, if not addressed, could begin to affect longer-dated
>> > debt issues, the value of which is based partly on expectations of
>> > developments many years in the future.
>> >
>> > Another critical long-run economic challenge facing the United States is
>> the
>> > need to ensure that our workforce is equipped with the requisite skills to
>> > compete effectively in an environment of rapid technological progress and
>> > global competition. Technological advance is continually altering the
>> shape,
>> > nature, and complexity of our economic processes. But technology and, more
>> > recently, competition from abroad have grown to a point at which demand
>> for
>> > the least-skilled workers in the United States and other developed
>> countries
>> > is diminishing, placing downward pressure on their wages. These workers
>> will
>> > need to acquire the skills required to compete effectively for the new
>> jobs
>> > that our economy will create.
>> >
>> > At the risk of some oversimplification, if the skill composition of our
>> > workforce meshed fully with the needs of our increasingly complex capital
>> > stock, wage-skill differentials would be stable, and percentage changes in
>> > wage rates would be the same for all job grades. But for the past twenty
>> > years, the supply of skilled, particularly highly skilled, workers has
>> > failed to keep up with a persistent rise in the demand for such skills.
>> > Conversely, the demand for lesser-skilled workers has declined, especially
>> > in response to growing international competition. The failure of our
>> society
>> > to enhance the skills of a significant segment of our workforce has left a
>> > disproportionate share with lesser skills. The effect, of course, is to
>> > widen the wage gap between the skilled and the lesser skilled.
>> >
>> > In a democratic society, such a stark bifurcation of wealth and income
>> > trends among large segments of the population can fuel resentment and
>> > political polarization. These social developments can lead to political
>> > clashes and misguided economic policies that work to the detriment of the
>> > economy and society as a whole. As I have noted on previous occasions,
>> > strengthening elementary and secondary schooling in the United States --
>> > especially in the core disciplines of math, science, and written and
>> verbal
>> > communications -- is one crucial element in avoiding such outcomes. We
>> need
>> > to reduce the relative excess of lesser-skilled workers and enhance the
>> > number of skilled workers by expediting the acquisition of skills by all
>> > students, both through formal education and on-the-job training.
>> >
>> > Although the long-run challenges confronting the U.S. economy are
>> > significant, I fully anticipate that they will ultimately be met and
>> > resolved. In recent decades our nation has demonstrated remarkable
>> > resilience and flexibility when tested by events, and we have every reason
>> > to be confident that it will weather future challenges as well. For our
>> > part, the Federal Reserve will pursue its statutory objectives of price
>> > stability and maximum sustainable employment -- the latter of which we
>> have
>> > learned can best be achieved in the long run by maintaining price
>> stability.
>> > This is the surest contribution that the Federal Reserve can make in
>> > fostering the economic prosperity and well-being of our nation and its
>> > people.
>> >
>> > (end text)
>> >
>> > http://chennai.usconsulate.gov/wwwhpr050217a.html
>> >
>> > And Bush wants to import more illiterate, unskilled third world rejects.
>> >
>> >
>
>I'm sorry but I didn't find the part where Greenspan says that
>unskilled labor damages the US. Could someone point out the paragraph
>for me?

It's not there, most likely.  They're just cowardly honkeys who can't
stand the fact that white girls prefer Chicano men.