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Four Is the Magic Number


JACKSON HOLE, Wyo. -- There are lots of special things about the number four. It is a


number, a


number and the first nonprime number. It is the only number that can boast a quantity of letters equal to its value. It represents the most colors any mapmaker needs to guarantee that no two countries of the same color -- no matter their shape -- touch each other (this is known as the

Four Color Theorem


It also speaks to interest-rate policy. Witness:

(1) The


moved from a bias to tighten to an inclination to ease -- in just over two months.



went from testifying that the "effects of hedge-fund flows probably have been substantially exaggerated" to asking every federal agency under the sun to investigate the stock-market implications of implosions of the

Long-Term Capital

ilk -- in nine days.

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went from


us about 19th-century investments in American railroads to


us about Death and Hell and pale horses and a bloodred moon -- all in a week.

(4) The

New York Fed

was ringing neighborhood brokerages to gauge probable reactions to particular policy moves -- just days before the



Mr. Green Jeans

The din of the Fed-behind-the-curve crowd has given way to an eerie quiet. Connecticut-born weeds surely hint at other kinds just below the surface, and everyone wants to know this: Just how meticulous is Greenspan about his financial landscape?

Answers come tomorrow. Greenspan began both the 1995 to '97 and the 1989 to '94 easing cycles with modest moves -- roughly 25 basis points in each instance. A baby step seems most likely this time, too.

Grave concern would merit more aggressive (50 basis-point) action. But usually only right-now emergencies prompt that kind of outsized move, and participants looking for one tomorrow are likely to be disappointed. The


plunged 22.6% on a single day back in October 1987, for example, and the Fed rushed to chop the funds rate by 75 basis points during the following fortnight. Most FOMC members now think that international developments pose a material downside threat to the domestic economy, but it is not clear that G can convince them -- especially against a backdrop of very tight labor markets and solid final demand -- that they are equal in scope to the market crash.

Keep an eye on the

discount rate

(the rate at which banks borrow from the Fed, currently 5%), which the Fed did not lower in 1987. G may want to engineer modest decreases in both the fed funds and discount rates to signal that he is acting to guard against financial instability but that there is no reason to panic.

Side Dish

The best Series baseball could offer --


-- is exactly the one it will not provide. Watch the one turf team go and win it all.