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Proposals are made for your reference as follows:
It is highly suggested that interest rates for the federal funds be raised in May and June this years slightly a little higher than the previous 25 base points, say, 28 or 29 base points, etc., and at the same time a tone will be elevated to give a hint that American Federal Reserve is likely to pursue consequent interest adjustment. On the one hand, it can give a full scope to the market adjustment function, and on the other hand, it can increase people’s prediction for further adjustment, thus contributing to the modulation of the inflation pressure.
The purpose of writing this article lies in rendering the economic decision makers aware of the inherent and partial genuine facts about economy which we have studied and know, so as to serve the world economy, and matter-of-factedly, America is one of the chief powerhouses fueling the development of the world economy.
We still pay more attention to the world economy, particularly the growth trend of American economy. If our research is to be of any help to you and American Federal Reserve, we are more than pleased to offer the consequent research results.
Attachment: a new economic research conclusion:
As regards the new economic explanation and practical application of the two guiding principles for the formulation of the monetary policy by the central bank:
Firstly, Price-level targeting. It means that the monetary policy shall be maneuvered depending on the economic price trends. We base our conclusion on the research and its advantage lies in that it can give full scope to the development and adjustment potential of the economy itself, thus reducing the conflict and confrontation caused by the opposite man-made policies. The kernel of this model requires that the decision makers need to have superb intelligence, skills and methods so that he or she knows exactly what time is the price upper limit region and lower price limit region that threatens economy (actually this is can be effectively oriented and analyzed) so that moderate policies can be taken in advance to cushion and adjust economy, thus preventing the economic phenomena of economic overheating and economic cooling. Take the third quarter of 2006 for instance; it will enter into the price upper limit region and lower price limit region that may threaten the sustainable and steady economic development.
Secondly, this model is the inflation targeting. It can set an inflation target and bring the economy under control within this scope with the advantages of comparative reliability and mildness. Yet its disadvantage lies in that it can partially offset the more development force and self-regulating function of the economy itself, and that it render the government economic decision making departments mired into the continuous adjustments and conflicts in the market. For example, the economy is endowed with an economic growth potential at 3.5% and at the same time, it maintains the inflation rate at 2.3%, and the unemployment rate at 4.5% or so. If we deliberately maintain the 1%-2% inflation targeting as a policy, the government will have to suppress and control the favorable economic growth trend in advance, thus playing the government off against the economic inherent function and causing economic waste and loss, reducing fund efficiency and slowing down the social development and bringing about the artificial policy-based damage and waste. However, through our careful observation and analysis, we find even though a certain country, a certain region or a certain economy endeavors to retain and push forward its economic development dynamic power as much as possible every year or every two or three years, there is always different inflation rate that will be harmoniously matched with it, which represents a perfect associated value integrated with economic growth rate, inflation rate and unemployment rate. In this way, we can only determine the values of the annual inflation rate for one year, two years, three years, etc., which complies with the powerful economic development in a most harmonious and effective way（which can be sought after by means of scientific approaches） rather than executing a mechanically rigid inflation target value. This can transfigure the ideology of the formulation of the monetary policy for it overcomes the static policy flaws as required by this policy ideology which doesn’t comply with the dynamic economy and also brings the advantages of this monetary policy ideology into full play.
Well, so much for now. As space lacks for a detailed description, I just leave it at that. Hopefully it can offer some help or some food for thought to you and American Federal Reserve, thus it can be of some help to the American economy and the sustainable development of the world economy.
(Attached you will find the Chinese original version (for your reference) with a view to avoiding errors or misunderstanding in translating from Chinese into English).