For the most part I agree with the article but there are so many other factors to consider in a global economy. I don't see how the past 50 bp rate cut will solve any problems and I believe it is only forestalling the inevitable bursting of the current US real estate bubble. But, Greenspan is not acting alone. Didn't the majority of fed governors push for the rate cuts? These are all smart economists so why do they all think that? The Fed has to fight inflation, they also have to make sure the USD isn't too strong against other world currencies, now deflation is a serious concern. If as some of you speculate one of the largest banks in the world is really having problems, that has to be factored into the equation. Add into the mix that you have an administration that flipped a surplus into a increasingly large deficit while most forecasters were predicting a continued reduction of the gov't debt (i guess the 30 year bonds will survive after all). It ain't easy. Most of those of you on these boards putting down Greenspan are just Sunday afternoon quarterbacking. I'd be willing to bet that 99% of us were saying how great a job he was doing only a few years ago. I need to add that calling someone a liar because they said or wrote something 30 years ago is poor. I'm sure all many of us have changed our views as our lives evolve. I won't jump on the bandwagon and put down Greenspan. I'm certain he's a much smarter man than me. One thing I'm sure of is that the US real estate bubble will burst and the appalling savings rate will catch up at some point in time. The key for us Sunday afternoon quarterbacking should be figuring out how to play them.
what's there to comment on? how many people here are actually trained economists that really know enough about the subject to comment on it intelligently? and please, who the hell is looking for the "next hot fix".. i'd slow down there jack
:eek: ... ... ... ... <font size=1>popular opinion never, ever, ever gets the whole story. i thought every trader knew this. The time to be fading Mr. Greenspan was when everyone, and I mean EVERYONE, was carrying him around on their shoulders and calling him a saviour. It takes no courage or foresight to diss him now.</font>
ALMOST Sir Alan Greenspan. What a joke. I have always been sick to my stomach how this man is adored by politicians and others especially since his use of the English language has left their lazy minds nodding in agreement because it's too much trouble to figure out if he is really saying anything of true substance. I believe the latest rate cut and more to come is really a PANIC by Greenspan to try get homeowners to refinance because in the future they are going to NEED as low as possible mortgage rates .We are in my opinion entering a stage of massive DEFLATION. There are many contributors to this. One is demographics and the other is CHINA. China will slowly at first but then at a recklous pace Deflate the whole world. It has started already. Another thing I don't recall Greenspan saying anything much about energy costs but personally I think the Bushies have figured out the ONLY way they can save the economy for the next few years is to get OIL down to $10 as soon as possible.
There are too many unknowns to really question Elmer. How much does he know about future (potential) banking problems? The New York Times has articles on both a troubled German bank and also all the Chinese banks being worse than the Japanese banks.How much pressure do politicians play into this (people vote with their wallet)? I remember reading an article on bloomberg about Europeans obsessing about American consumer confidence but their central bank does nothing to help themselves and looks to us to get the world economy going.Our globization is dependent on us instead of a cooperative effort by the EU as well as direct competition from Asia in manufacturing.What really worries me most is ; A falling dollar makes our debt harder to service, with credit as cheap as it is who is left to get it but the unqualified( yes they are buying homes left and right ),and now pandora's box with terrorist activity. Most people have not a clue how much Americans are hated over seas (a Desert Storm vet) and if it weren't for two big oceans , frozen tundra to the north and a welfare state to the south we would be subject to alot more violence such as Bali. This all has to be on the mind of OUR central banker ,not others as we are the global economy, so a blanket opinion can't be suffice as I don't think anyone here has experience as a central banker. Anyways just my two cents.
For some time now I have seen our current financial woes more a result of a "liquidity bubble" than a asset or stock bubble. It all seemed to start in Asia in the late 1970's-1980's with Japan financing a huge increase in manufacturing capacity. After the "Asian Contagion" it came home to roost and caused their market to drop. It then migrated to the US markets, where it first played out in equities and now seems to be going into real estate, the next "sure thing".
Great analogy. But conspiricy theory aside, what if the space program is really for that very reason (living ,working, trading from the space city by the way).The future is all about bio-chem,and if one is released (when not if) that makes life worse than it is ,wouldn't it be nice to have a plan to colonize say Mars? The wheels were already set in motion years ago after anthrax was released on an island off Scottland ( after 60 years is still inhabitable) and the Nazi's bio-programs were found.It seems the more you question the more questions you have.And somethings i don't really want to know.
Well, you're rambling a bit, IMO, but, to be fair, I suppose I should put back the post that you're responding to, that I had deleted - just so everyone knows you're not coming totally from left field. Not the first time this kind of ghost-post thing has happened to me. Anyway, I'd had second thoughts about its relevancy, but here it is again: From DISTRACTION, by Bruce Sterling:
what has changed, since i (47 yo) was a kid... many people are living check to check, as i suspect some companies are.... people used to avoid debt more... people purchased houses with the intention of paying them off, not as a source of funds to make discretionary purposes. people were less apt to finance the purchase of a $40,000 depreciating asset ("status symbol")... people saved for a rainy day... people had a greater chance of lifetime employment... welfare was a stigma.... immigration was more orderly - we chose who became americans... japanese products (and those from other countries) were perceived as cheap (and in the beginning they were) and were scorned. people were more self-reliant. how have things changes and impacted our lives... people have more household debt. people continue to erode their home equity... you see, people think if they can afford the payment (at historicaly low rates), then they can afford the asset (debt). this is only an accepted truth since mortgage companies raised the allowable mortgage debt % over the years. if it went back to 25%, what would happen to home prices? making the payments on a $500,000 mortgage is a lot easier via an ARM during good times - how many of us would loan a $500,000 to someone who only had managed to save $25,000 (5%) as a downpayment? welfare is now viewed as a right and anyone who suggests that able-bodied people get a job, any job, rather than going to the welfare office is seen as a whacko, or in some instances racist. if a shock event increases unemployment, then it is the govt's responsibility to extend benefits, pay money to inefficient businesses (airlines, et al)... individuals or companies who failed to provide adequately for potential problems are no loner viewed as "irrepsonsible." and someone should pay for their housing, health care, training, etc... unchecked immigration continues to swamp the existing infrastructure... instead of getting the "best of the best" from a broad spectrum of the globe, we ACCEPT (de facto) whoever happens to come though the hole in the fence on any given night. anyone who suggests that this be regulated is branded a racist and in the southwest (maybe nationally too) is essentially unelectable for public office. foreign competition is fierce. prices are being driven down by global competition.. foreigners are working their asses off of pennies! meanwhile, debt becomes harder to service as profits and market-share shrink. can wage cuts be far behind? as opposed to the jobs shipped overseas? and increased electronic immigration continues - see software companies in india, data entry in the carribean. lifetime employment is only a dream, except for postal workers and the like (LOL). if you continue to have children (out of wedlock or otherwise) that you cannot afford, dont worry: it is society's duty to provide for your children and YOU. go ahead and have more, the benefits will be increased! if you educate yourself, work hard, take risks and succeed, you are expected to pay higher tax rates. why? (this is rhetorical and not an invitation to discussion regressive income taxes). success used to be the result of a lot of hard work (which its IS); now it is somehow viewed as LUCK, and since you were just lucky, you should share with everyone that was not so lucky(this is hard to express, but maybe a few will grasp the deeper meaning). an on and on... a 50 bp cut in the Fed Funds rate is not going to solve these ills. loaning more money to argentina, who cannot make payments on the existing debt, or any other "basket case" country is only postponing the inevitable.... and loaning more money to UAL is only postponing the inevitable... and "loaning" more dough to cash-strapped "joe sixpack" is only postponing the inevitable.... and loaning max amounts to r.e. investors in a bubble will likely come home to roost. and increasing benefits/welfare for people who CHOSE to spend all their money and then some (DEBT) is only postponing the inevitable.. and once again, a 50 bp rate cut is not going to cure these ills.
The thing is nitro, the fed already had plenty of wisdom to draw upon. The 90's were a replay of the 20's. There have been at least half a dozen periods of history where the public has taken an excellent new innovation and gone waaay overboard in terms of irrational valuations. Airplanes, cars, electricity, railroads, bowling stocks, on and on you name it. The bubble developed in the 20's because a) it was an age of exciting progress, and b) it was a benign inflationary environment that allowed the seeds of excess to be planted. I am not piling on to Greenspan because of the ugly outcome after the bubble popped. I was saying the same thing five years ago, and Fleckenstein was saying it before that!!! It's BS to give Greenspan a pass because plenty of individuals did learn from past lessons of history, and Greenspan's OWN WORDS demonstrate that he had a personal knowledge of past history himself. This is not about kicking an old man when he's down. This is about holding someone accountable for lessons that he learned but ignored. He knew all about the history of excess, he knew all about the history of bubbles developing in benign environments, and he was even speaking up about it in 1996- but then for some reason he decided to shut his mouth and play the game. He decided he would rather hold on to his popularity than stand by the conviction of history, the exact opposite of what a credible and accountable leader would do. For those who say he didn't have any real power, give me a break. Even now the ability to manipulate the money supply is still gargantuan in terms of power. The entire world was hanging on his every word for years, literally- he had huge amounts of authority simply in the opinions he voiced. At the height of his influence, I wouldn't be surprised if his farts were being analyzed for their economic portents. And back to the promise of technology: TECHNOLOGY AND VALUATION HAVE NO INTRINSIC CORRELATION. Ever hear of "profitless prosperity"? This is also a concept that rational people understood long before the bubble, including Greenspan. If a company comes up with a great new innovation, but so do a bunch of other companies at the same time, then the CONSUMER benefits in the form of a great new product, but the lack of pricing power due to competition means that the valuations of the companies do not deserve to rise out of proportion to their profits!!! Let's say that the top ten pharmaceutical companies all came up with the same cure for cancer at the same time. This would be a great boon to society obviously. But whither the valuations of the pharma companies? Competition would ensure a low price- in fact, the margins on such a wonder drug might not be higher than that of any other drug given a fast enough distribution of the formula. Now go back and look at the dot com sales sector. It was plain as the nose on anyone's face that a sector with supposed profit margins of a gazillion percent would be drowned in competition before you could shake a stick at it. This is exactly what happened. And it didn't take a genius to see that it was going to happen. It just takes common sense. And I was saying the same thing in 1999 and so were plenty of other people. Innovation + competition = benefit to society but it does NOT equal a 250+ price to earnings ratio because competition arbs away profits back to normal levels. A company with a great product may well be a lousy investment. So "bubbles" and innovation do not have to go hand in hand. They only do because stupid folks forget the common sense lessons time and time again. But that's why "smart" folks like Greenspan are supposed to keep a rein on things instead of pouring gasoline on the fire. Greenspan KNEW what he was doing, he KNEW that history counseled a different course of action, but for some reason post 1996 he decided to zip his lip and play puppet. He chose to fall down on the job for reasons of popularity or some other self centered interest. He can't hide behind smoke screens of how hard his job was or how "complex" it was, give me a break, he had demonstrated prior knowledge and understanding that he failed to act on and thusly he shirked his duty to the detriment of the country. This is not kicking a guy when he's down, it's calling someone to task for failing in their responsibilities for a deplorable reason- a desire to preserve their own glory.