Hoodwinker's hogwash: Our government is hard at work trying to reduce unemployment.

Fact: The Federal Reserve Bank usually raises interest rates whenever the unemployment rate falls "too low."

The Prism asked Doug Henwood of Left Business Observer to comment:

"[The Federal Reserve, chaired by Alan Greenspan, boosts] the federal funds rate, which is the rate banks charge each other for overnight loans, and, less often, the discount rate, which is the rate they charge banks who borrow directly from the Fed, which is something banks usually do only when they're in trouble.

"Discount changes are more for symbolic effect; fed funds changes are where policy bites.

"And no they haven't pushed up the fed funds rate lately. The next meeting of the policy - setting federal open market committee (FOMC) is on August 20; they may raise the fed funds target rate then. Greenspan may have been given authority at the last FOMC meeting (July 3) to raise rates on his own. Wall Street was alarmed by the strength in the last employment report - not only is employment up and unemployment down, but wages are running ahead of inflation - but the consensus among financiers is that the economy will weaken of its own accord in the second half of this year. So they hope; they desperately want a weaker economy, but don't want the Fed to tighten to accomplish it, since Fed tightenings are hell on the stock and bond markets."

Some economists believe that there is a "natural rate" of unemployment, estimated at around 6.2% in 1993 by Fed Reserve analyst Stuart Weiner.

So what if it dips below the "natural rate?"

As Henwood wrily wrote in Extra! (Sep/Oct 1994): "The real reason a low unemployment rate is to be feared is that it increases the bargaining power of labor - a crime against nature!"

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