- The Washington Times - Saturday, May 17, 2003

Don’t blame India for golfer’s bad manners In his commentary on golfer Vijay Singh, “PC media fan sexism embers” (Sports, Thursday), Barker Davis wrote the following: “Singh isn’t a racist; he’s a sexist. And he comes by it naturally. His birth certificate might say Fiji, but Singh is Indian by heritage. Nothing against India or Hinduism, but it’s certainly fair to say that culture hasn’t been at the fore when it comes to gender equity. Singh definitely was remembering his patriarchal roots when he made his comments about [golfer Annika] Sorenstam.” I’d like to tell Mr. Davis about how much gender equity has progressed in India, maybe far more than in America. This is the year 2003, and the United States has not yet had a female president. Yet, in the 1970s and early 1980s, India had a female prime minister, Indira Gandhi. She was no mere rubber stamp for male politicians, either. She was instrumental to effecting a host of social and political changes in that young democracy. So please don’t blame Singh’s culture and heritage for his utterances, which are deplorable. SUNIL ANAND Centreville Defining deflation The recent editorial analyses on deflation make the wrong diagnosis and, thus, advocate wrong solutions (” ‘Latent deflationary pressures,’ ” Thursday, and “The Fed and expectations,”yesterday). First, weak growth does not cause deflation. This confuses contraction, an economic concern, with deflation, a monetary phenomenon. Just as inflation is defined as too many dollars chasing too few goods, deflation is too few dollars chasing too many goods.In both cases, a mismatch occurs between the economy’s demand for liquidity and the government’s monetary policy, which causes a decline in the unit of account. The current downward pressure on prices represents a series of errors in monetary policy, not a slide in demand. Rather than being a new threat, the deflationary fuse was lit in 1997, when world economic growth demanded more dollar creation at a faster pace.The Federal Reserve, focused on managing economic growth and fighting nonexistent inflation instead of price stability, failed to meet this demand, leading the scarce dollar to appreciate in real value. As measured against gold, the most stable and sensitive barometer, the dollar increased in value by 30 percent, from $385 per ounce, where it had been perched through the mid-1990s, to lows around $250 per ounce. As the first stage of deflation took hold, other price-sensitive commodities, such as agriculture, oil, precious metals, followed gold downward. This temporarily benefited intellectual enterprises such as the dot-coms, at the expense of the world’s farmers, miners, ranchers and the communities that support them. In the second stage of deflation, as contracts unwind in a generalized fall in the prices of intellectual goods, there is a reversal of these favorable terms of trade. The “bubble” bursts and a recession sets in as profit margins dry up and debt burdens become unmanageable. Which brings us to the present. Once deflation has taken hold, there are few effective weapons to fight it.The Fed, intent on ignoring the lessons of Japan, has brought short-term interest rates down to near zero and is now considering going lower still.Yet price declines persist. Will it take a decade of slow and negative growth before policy-makers wake up? The Fed should jettison its “funds rate” mechanism and return to a price rule, in which it expands or contracts the Fed’s balance sheet directly.Under this model, the Fed need not “hope” that a decrease in the funds rate would loosen money, it would do it directly by buying bonds with new dollars.By pledging itself to defend the dollar at a particular price relative to an objective value such as a commodity basket or the gold price, the Fed would restore price stability, end the deflationary spiral and create conditions for future growth. S. RUSHTON Washington Thursday’s editorial ” ‘Latent deflationary pressures’ ” contains a common misconception about inflation and deflation. Even the Federal Reserve can be heard to equate inflation with rising prices and deflation with the opposite.In fact, price changes are only a common symptom and not the real problem. As a result, the problem can be misunderstood and the recommended solution can make the problem worse. That is the case here. More accurately, inflation happens when the volume of money and credit rises relative to the volume of goods available and the relative value of money falls. If the value of money falls far enough, deflation is necessary to restore its value. The risk of deflation is an implicit recognition that the value of money has fallen too far. It doesn’t really make sense that we could restore the value of money by “further loosening of monetary policy.” How can we restore the value of money by further reducing its value? Think about it: The Fed’s broad measure of money supply (M3), also commonly known as cash, is currently growing at more than 7 percent. The Fed has repeatedly reduced interest rates to the lowest level in more than 40 years. Bloomberg’s year-to-date tally of total U.S. domestic debt sales is up 24 percent. In two years, we have added $5 trillion in new home mortgages, and Federal National Mortgage Association projects have added another $3 trillion this year. Meanwhile, U.S. gross domestic product (GDP) is only $10.7 trillion and it is only growing at 1 percent. We already have extraordinarily loose monetary policies and they have not succeeded at restoring economic growth. But, even if throwing more money and credit at the GDP growth problem were to induce higher growth, the value of this money would further deteriorate and the risk of deflation would grow. The Fed’s real problem lies in finding a way to restore the value of money. After all, the Fed is primarily responsible for maintaining a stable monetary system.The rest of us are responsible for using this money wisely so that the economy can grow.Fiscal stimulus is a possible bromide for the growth problem, but we should expect to hear the Fed complain that government deficits will increase the risks of deflation by further eroding the relative value of money. I guess my greatest concern is that I do not hear the Fed saying this.I do not hear the Fed taking action to maintain our monetary system. I fear that rampant deflation may be the only way to get the attention of our policy-makers on the real monetary problem. RICHARD RYBERG Germantown Inappropriate remarks I was appalled by Assistant Secretary of State for Near Eastern Affairs William Burns’ remarks — reported in Joel Mowbray’s Wednesday Op-Ed column, “Not pledging allegiance” — that, “The common sense of all peoples will override the conservative and Christian viewpoints once they see the road map’s potential.” If Mr. Burns had said, “The common sense of all peoples will override the Jewish viewpoint,” would not his remarks be rightly regarded as anti-Semitic? Or if he had said that people’s common sense would override “black viewpoints,” wouldn’t his remarks be correctly perceived as racist? To pick out a particular religious (or ethnic, or racial, or gender) group as holding viewpoints contrary to the interests of “real” people is bigotry and incompatible with holding any office of public trust and responsibility in the United States. We all, at times, make stupid and ill-considered remarks that may not accurately reflect our true character and opinions. (Although, in a job carrying the responsibility and prestige of Mr. Burns’, these occasions should be extremely rare.) If that is the case, then Mr. Burns should renounce his remarks, which singled out Christians, as being thoughtless, ill-considered and due to a lapse of judgment on his part. But if the remarks reflect his true opinion of Christians as being, by virtue of their identity, inimical to the “common sense” or best interests of “the peoples,” then he should be immediately removed from office. DR. GLEN I. REEVES Washington

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