Masonry Magazine October 1985 Page. 16
WASHINGTON WIRE
continued
THERE ARE STRONG MINORITY DISSENTS from this moderate-growth view-forecasts that visualize much stronger... as well as much weaker scenarios for the next five or six quarters. Here are two such contrasting outlooks:
• On the optimistic side, a few analysts can foresee a boom, beginning in the fourth quarter, after a lethargic summer. They expect rises in inventorying and capital investment.
• On the pessimistic side, some predict a severe recession. They worry that a slumping dollar will discourage inflows of foreign money and so force up interest rates, slowing business activity in this country all across the board.
WASHINGTON DOESN'T SEE a big change in interest rates from present levels in months ahead. Officials at the credit-controlling Federal Reserve find no reason to be much easier or tighter-in today's economic climate. This is probably the best assumption you can make in doing your planning-business or personal: Financing your business buying a home investing.
FED OFFICIALS THINK rates are nearly as low as they could be pushed without running some risk of ballooning the nation's money supply at a time when the Federal budget is far out of balance and certain to stay that way. The stock of money is already growing faster than just about every policy-maker feels comfortable with... and more rapidly than the official targets. Many economists fear that it just could be put to work with a sudden rush. If that comes at a time when the sliding dollar is making imports costlier, the price indexes could begin to climb rapidly, with inflation rekindled.
This may not be the most likely scenario. But officials believe that the danger does exist, and the Fed's credit-controllers remain very much aware of the possibility.
BUT THEY ARE NOT GOING TO FORCE interest rates much higher, either. Business isn't showing many signs of developing a boom in the second half. Officials will stand pat even if money growth doesn't slow to a less zippy pace. They see no likelihood that inflation will erupt in the near future. Except for seasonal blips in food, the price indexes are behaving very well. Wage settlements remain very moderate, and there is plenty of idle capacity.
Indeed, the months to come will see price drops in major commodities that could mean new slowing in the indexes.
• Gasoline has fallen this summer, usually a time of rise. Growing Middle East output may cut prices 5¢ a gallon.
• Natural gas will drop this winter. Deregulation, lower demand, and heavy output should bring downward pressure.
THE STAGE IS SET for a series of confrontations between the President and Congress in the months ahead over a number of major, pressing problems. Ronald Reagan is prepared to throw down the gauntlet to challenge lawmakers of both parties over whose version of key legislation will finally prevail.
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16 MASONRY-SEPTEMBER OCTOBER, 1985