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U.S. Needs a Fresh Economic Policy

August 28, 1994

"Good Jobs News Put Wall Street in Gloomy Mood" said the headline on Aug. 6. Why the investors' gloom? They know that the Federal Reserve uses such indicators to increase interest rates to put dampers on the economy. With a current 6% unemployment record, doesn't that sound a bit Draconian?

It is reminiscent of the time-honored medical practice of bloodletting to relieve patients of "bad humors" believed to cause illness--a practice long since discontinued.

Are we tolerating an outmoded practice of economic management? Should we even try simplistic interest rate juggling to fine-tune our economy now struggling with a very complex global situation?

A highly placed monetary authority doesn't agree. Edward M. Bernstein, one of America's true currency experts and a veteran of the 1944 conference at Bretton Woods, N.H., that set up the post-World War II international monetary system, says that rising interest rates hurt the U.S. economy and could be disastrous. His words echo often among currency and economic authorities.

U.S. Sen. Tom Harkin (D-Iowa) complained recently that such practices place the "narrow interests" of the bond market ahead of the standard of living of American workers.

Decades of unfavorable foreign trade balances, nagging unemployment and rising prices suggest we need another high-level Bretton Woods approach to the new problems of our post-Cold War period.

Isolationism is gone. World trade treaties are becoming profitable while putting more of our people back to work. Can't we do better than manipulate interest rates at workers' expense?

WILFRED D. BRUGGER

Torrance

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