El Guapo's Ghost Rambles on about the Red Sox

IT’S THE ECONOMY, STUPID!

The Red Sox rotation is on the verge of disaster with two members performing below replacement level and an inconsistent Josh Beckett. Matt Clement and whoever has been terrible overall. It is time for a change. (BP's Will Carroll on Clement: Clement to the Boston Herald give pause: “It’s a dead feeling,” he told them. “It’s something that slows me up and scares my body.” It sounds a bit like the nerve problems suffered by Chris Carpenter and Brad Penny, just before the real problems started. Oddly, Clement’s velocity was in the range of his normal output, yet his control was off. That normally means the problem is in the elbow, something no one has yet suggested.) As for possible replacements, David Wells “is not walking through that door” anytime soon and without a vast improvement in his control, Jon Lester should not be more than a stop gap. So the Olde Towne Team will need to look outside the organization for one decent starter NOW (more on possibilities tomorrow). And like the Sox rotation, the Fed needs to seek assistance on the economy from other sources.

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Alert! Three paragraphs of non-baseball related material below. Continue reading at your own risk.
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The Fed has a more direct relationship with influencing demand, through the change in interest rates, than the rise and fall of prices. Consumer demand is only one factor in determining the rate of inflation, and as the recent May data suggests (both the core producer and the CPI are up), it is not the driving force behind a rise in prices.

Peter Morici states that…

Although inflation is heating up, April and May retail sales, jobs and wage data indicate the economy is slowing, as do recent reports from the automobile, housing and construction sectors. International oil and commodities markets remain the most important sources of inflation, but those are beyond the reach of Fed policy. If the Fed acts too vigorously to contain inflation, it risks derailing the economic expansion and pushing up unemployment.

In our current situation, it appears that the Fed can do little good - stalling inflation – with great potential to slow the economy.

Since the “international oil and commodities markets” are putting the petal to the inflation metal, fiscal rather than monetary policy - changes in interest rates by the Fed - should be implemented, as it can specifically target certain areas. In this case, the government can act to reduce the demand for oil, and thereby have a greater influence on curtailing inflation than the Fed. Unfortunately, no powerful politician(s) of either party is highly motivated to take action beyond the usual rhetoric, which could lead to a recession or worse.