Fed perspectives

NEW YORK (AP) -- After nearly a year of warning about inflation, a danger most people haven't been able to see or feel, the Federal Reserve faces another danger, this one involving its very credibility.

It is the same predicament faced by the boy who cried ''wolf'' too often, and by Chicken Little.

Despite The Fed's declaration that inflation was a clear, present and future danger, most Americans have continued to do what they've done for the past decade, that is, work, earn borrow and buy.

In doing so, they have forced the Fed's hand. After raising interest rates five times by a quarter-point since June, it had to show it meant business. Its sixth effort was a half point; the Fed hinted of more to come.

The intent is to save the economy, not pitch it into recession, but the latter is a possibility when using imprecise instruments to direct the course of so massive an economy. The effort is inherently risky.

The situation also leaves questions about the power of monetary policy, especially why previous increases were ineffective in slowing the economic expansion to what is deemed a sustainable rate of growth.

The Fed seems to insist that there remains one eternal truth, it being that at some point there just won't be enough manpower and other resources.

That is, there are limits for which even technological genius has no answers. Productivity gains can lift the economy to higher operating levels, but the process can continue only with diminishing returns.

Anticipating that time, the Fed more than ever insists on a slowdown to allow the nation's resources to catch up and the expansion to continue. And so it employs ''prescribed burns,'' or higher interest rates.

When that term is used today most people think of the unfortunate events at Los Alamos, N.M., where brush fires, set intentionally with the aim of averting more serious fires, raged out of control.