Newspaper Archive of
The Adams County Record
Council, Idaho
August 15, 1984     The Adams County Record
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August 15, 1984

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m. THE RECORICOUNTRY EXTRA-August 15, 1964 - Page 4 SOLVING THE BUDGET DEFICITS WILL HELP HOLD DOWN INTEREST RATES AND IMPROVE BUSINESS supply and demand. For instance, in the early 1980's, the classic laws of sup- ply and demand were clearly evident and working. The bid- ding up of commodity prices. particularly enemy, was a well-entrenched trend follow- ing the Arab oil embargo of 1973. However. with nearly eight vea of conservation measures reducing demand and as escalation ofoil prices led to stepped up domestic drilling and, exploration which increased available crude oil supplies, prices tum- bled The back of the infla- tionao spiral which had been with us for nearly a decade had been broken and another crisis pa.sed At limes, lYee markets can only f'us attention on economic problems v, hich need response in the form of fiscal action or monetary pol- icy change. High Interest Rates Can Slow The Economy Today, we thee a test. The perception of ongoing Federal budget deficits and their im- plication for future inflation and interest rates will not be tolerated by the bend market. Interest rates have risen to their highest levels since early 1982 and real rates re- main at record levels. We ex- pect that these high real rates of interest will slow the economy in such a way so as to lower credit demands and ease rates somewhat over the next two to three quar- ters. By Ronald T Sek.roeder. PresidenL J& W. Seliffman & Co., lacorpo ted As of this writing, we are in the midst of the fifth economic crisis in the past six years, This time it is the Fed- eral udget crmis. The budget deficit Impacts on the sup- ply and demand for Ioanable funds. There are three alternative outcomes 1, Preferably. market conditions will spur legisla- twe action to resoh'e the crisis. 2 If not, the marketpla'e will raise the price of money interest rates* to levels which will slow econmmc growth 3 If allowed to persist t,m long, such an approach could halt the business I'coverv. The last course is a high risk path at a time when we are in the midst of a healthy but fragile wcticat economic recovery Allowing free mar- ket interest rate levels to slow economic gwth and run the risk of aborting the business cycle, at a time when our domestic econemy cannot tol- erate another recession, is an outright case of economic brinksmanship, regardless of election year politics, Free Market Is Healthy A free market environment is a healthy environment. Often. the market itself can resolv,  Imbalances in the economy in a very natural way by allating economic resources through the laws of CHr00Y TOUGH IS T00q[ING CHARGE Risk exists if the economy does not slow fast enough and interest rates remain at these lels or higher. Even greater risk exists if current high rates abort the recovery, and push the economy into reces- sion. At present, we see few signs of excesses in the eco- nomy and give the latter pos- sibility a low probability of happening. 1 Understanding The Problem To understand today's crisis, imagme yourself hik- ing in a forest. You come to high ground with a wide abyss preventing an easy crossing. If a bridge were available, you would continue your hike at the same pace. But there ts no bridge. You must pause, traverse the abyss before you can move on, Moreover, as the forest floor is thickly wooded, you cannot determine the terrain of the abyss so you have no idea as to its steepness and how long it will take you to cross. The analogy, to our economy is that we are at a point where the fiscal imbalance of our economy will not allow us to continue. Our government's revenue collection system as currently structured is in- adequate to match govern- ment spending now and in the foreseeable future, Hence. an ab-ss has been created. If high real interest rates slow business activity in just the right way, the economy should continue its non-in- flationary recover, moving easily out of the abyss. We have the POWER and PRICE to meet your need. ' 5-10 4x4 Pickup Diesel? Gasoline? S-10 or Full Size? Ask and we'll provide! S-I0 4x4 Blazer Coachmen RV Center  Illl 1 I I III I Illllll I However, should the econ- omy not slow significantly or, worse, should time pass with rates continuing at current levels or higher, the economy could be pushed into the abyss of recession. While this is a low probability, its possi- bility cannot be totally dis- counted, Our economy is fragile. In other words, our hiker might become lost in the abyss. Bipartisan Propois Can Solve The Problem A solution does exist. Simi- lar bipartisan proposals are now before Congress. There is hope that party politics can be put aside in an election year to effect the necessary legislation to move us over the abyss of permanent budget deficits and their corollas" compounding in- terest rate effects. We are at one of the pivotal points when the marketplace is clearly demanding a change in fiscal policy to deal with credit availability. A bridge to continue on the path to economic growth is availa- ble. The bridge must consist of legislated reform of the Federal tax code to bring gov- ernment receipts up to levels sufficient to match the struc- tural spending built into our economy. J.&W. Seligman & Co., In- corporated is a leading invest- ment manager and adt, tsor, responsible for $4.5 billion in assets including the Sehgman family of mutual funds, Tri- Continental Corporation and private indicidual and tnstL tutional accounts. Uncle Sam is standing on line along with consumers Ill l Suppling the Farmers with Excellent Products and Service. to borrow money. Ws be- cause the government is spemling more than it takes in, so it h to bor- row the difference. I00-3F Uke tickets to the World Series, there's also a limit to the number of dollars available for loans. This makes the price go up. Just as tickets are worth more when many people want them, money is worth more when many people want to borrow it, and those with money to lend---not just banks but also ordinary investors-- expect a higher rate of interest. ONES Ford Tractor,, CUISINE NOW UNDER NEW OWNERSHIP LIVE MUSIC Mon. thru Sat. For your listeninl] & dancing pleasure. Open 7 days a week 11:45 A.M. to 2:00 A.M. S.E. 2nd Ave. Ontario, Ore. 881-1344