<!DOCTYPE HTML PUBLIC "-//W3C//DTD W3 HTML//EN">
<HTML>
<HEAD>
<META content=text/html;charset=iso-8859-1 http-equiv=Content-Type>
<META content='"MSHTML 4.71.1712.3"' name=GENERATOR>
</HEAD>
<BODY bgColor=#ffffff>
<DIV><FONT color=#000000>Interesting letter in today's New York
Times:</FONT></DIV>
<DIV><FONT color=#000000 size=2>---------------------------------</FONT></DIV>
<DIV><FONT color=#000000>To the Editor:</FONT></DIV>
<DIV><FONT color=#000000 size=2> <FONT size=3>Re "Some
Depressions Aren't So Bad" (Op-Ed, Nov. 24):</FONT></FONT></DIV>
<DIV><FONT color=#000000 size=2><FONT size=3> Niall Ferguson's
article is yet another example in a long line that presume that the late 19th
century and the past quarter-century are similar to a high
degree.</FONT></FONT></DIV>
<DIV><FONT color=#000000 size=2><FONT size=3> In fact, they
could not be more different in the one area that matters
most.</FONT></FONT></DIV>
<DIV><FONT color=#000000 size=2><FONT size=3> In the late 19th
century the production of goods and services rose much more rapidly in the
United States, even as prices fell, than it has in the past 25
years.</FONT></FONT></DIV>
<DIV><FONT color=#000000 size=2><FONT size=3> Gross domestic
product, after discounting for changes in prices, grew by 4 percent a year on
average between 1870 and 1910. Since 1973 it has grown by only 2.5 percent a
year.</FONT></FONT></DIV>
<DIV><FONT color=#000000 size=2><FONT size=3> This is an
enormous difference. We would be producing about 45 percent more goods and
services in 1998 (more than $3 trillion) if we had grown at a rate of 4 percent
a year since 1973. The reason we didn't is the slow growth of productivity, or
output per hour of work.</FONT></FONT></DIV>
<DIV><FONT color=#000000 size=2><FONT size=3> Between 1870 and
1910, productivity grew by about 2 percent a year. Since 1973 it has grown by 1
percent a year, much more slowly than it has over any other sustained period
since before the Civil War.</FONT></FONT></DIV>
<DIV><FONT color=#000000 size=2><FONT size=3> Today, there are
some admirable productivity gains in some industries.</FONT></FONT></DIV>
<DIV><FONT color=#000000 size=2><FONT size=3> In the late 19th
century there were enormous productivity gains in a much wider range of goods
and services. These gains are what drove prices down then.</FONT></FONT></DIV>
<DIV><FONT color=#000000 size=2><FONT size=3> Today, prices
are going down primarily because of global over-investment and, secondarily,
because of Government policies that are designed to constrain
demand.</FONT></FONT></DIV>
<DIV><FONT color=#000000 size=2><FONT size=3> Simple
historical comparisons to the 19th century are highly
misleading.</FONT></FONT></DIV>
<DIV><FONT color=#000000 size=2><FONT size=3> Any optimisim
about the possibility of deflation in the United States is
unwarranted.</FONT></FONT></DIV>
<DIV><FONT color=#000000 size=2><FONT size=3></FONT></FONT> </DIV>
<DIV><FONT color=#000000 size=2><FONT size=3>Jeffrey Madrick</FONT></FONT></DIV>
<DIV><FONT color=#000000 size=2><FONT size=3>New York, Nov. 24
1998</FONT></FONT></DIV>
<DIV><FONT color=#000000 size=2><FONT
size=3>_______________________</FONT></FONT></DIV>
<DIV> </DIV>
<DIV><FONT color=#000000>With the Dow reaching new record levels, what do you
all think Greenspan is thinking? Raise rates? Watching the American holiday
shopper? It's been said as EU growth slows, there's now room for them to lower
rates.</FONT></DIV>
<DIV><FONT color=#000000></FONT> </DIV>
<DIV><FONT color=#000000>Peter</FONT></DIV>
<DIV><FONT
color=#000000></FONT>-------------------------------------------- </DIV>
<DIV><FONT color=#000000 size=2><FONT size=3>"Don't call us when the New
Age is old enough to drink"</FONT></FONT></DIV>
<DIV><FONT color=#000000 size=2><FONT
size=3>-Beck</FONT></FONT></DIV></BODY></HTML>