Greenspan was the best I say. And A. Burns, not Volcker, was the Fed Chair when we shut the gold window I think
I don't think either of the above is right. Discount borrowings and deposits go toward bank capital ratios - 5, 10% or whatever, don't they? Banks create money by making loans off that 5-10% capitalization.
I don't know if you're older, but certainly you're not wiser! LOL. Just kidding around piezoe...I always respect my elders. Certainly there is a problem in the real estate related businesses. The question is whether we can lay all of this at Greenspan's feet. I don't think so. The problem today is started with subprime loans. Some people think this is something new. But actually, this is something that has been around a long, long time. Every few years as a matter of fact, there would be another crisis revolving around subprime lenders. The only thing is that no one would hear of it, because subprime was at that time a small business. It really did not get to be a big business until they started securitizing the loans. Wall Street then took it from there, leveraging these loans, etc etc. The whole pyramid, stupidly enough, rested upon this subprime borrower, a guy who you and I would not loan a dime to. And so now, it is all failing. But what makes you think this is all Greenspans fault? Certainly he didn't invent subprime. He didn't securitize it, or even bless the securitization. He didn't tell lenders who they should loan to, what the terms should be, etc etc. He didn't tell Wall Street guys to buy the subprime loans, then borrow 90% against them, thus leveraging them up and creating huge risk. Could Greenspan have done some things different in the tech boom, or the real estate boom. Certainly. But I want to stop short of accusing Greenspan of being responsible for some guy who chased these tech stocks with no value at the high. Come on Pie. You can do better than that. Unfortunately, I think all too often the opinions people hold are what they read on the internet. Take Bill Fleckenstein for instance. This guy has been calling for the eminent demise of Western civilization since the beginning of time. He hates Greenspan, and is not shy about writing about it. And alot of folks read this stuff, then parrot it, all the while not giving it a great deal of original thought or analysis. Now whether you have done that or not, I'm not here to say. But the FACTS really don't support the conclusions you have...and you gave no facts, now did you. It is a fact that there was a tech boom, and eventually it ended badly. This is a fact. It's an unsupported conclusion that Greenspan caused this. It's a fact that subprime loans helped to create a real estate boom. It's an unsupported conclusion that Greenspan caused this either. Now, if you would like to discuss how you think he did cause either of those very real events, I'm ready to discuss that. But really now, do you really believe that raising margin requirements would have helped the situation out? Come on Pie. OldTrader
My opinion is that Greensapn was responsible for excessive expansion of the money supply at too rapid a rate. Excessive and too rapid lowering of the Discount and Fed Funds rate. Failure to act on Margin rates. (It's my understanding the Fed controls those, correct me if i am wrong.) Fleckenstein turned out to be correct with regard to the sub-prime mess. He warned that this was coming at least two years ago, and i think before that actually. At the time i thought he was exaggerating, now i realize he was right on the money. Apparently he also thinks that Greenspan's easy money policy was the culprit.
It's true that A. Burns was the FED chair pushing for discontinuation of gold convertibility, but Volcker was head of the President's committee on monetary policy, specifically called the Volcker Group. It is the President who gets credit for the economic policy that discontinued gold convertibility, but it was the Volcker Group advising him on those matters.
My sense is that Volker acquiesced to the notion of discontinuing gold convertibility, as there was no other viable alternative. After all, the Gummint had already been excessively running the money pump and holders of gold certificates had been redeeming for the metal. The real problem was the same as now... too much print-money. If they hadn't suspended convertibility, perhaps ALL of the US's gold reserves would have been "redeemed for"... and we needed to put a stop to that. (Then again, perhaps Fort Knox is really just another ruse... all the gold that is supposed to be there has been long gone.... but gotta maintain the perception.. ??)
Daal, i'm not inclined to spend any time looking for data, as i have no need to be regarded as right. I will pose a question to you however. Suppose the Fed trading desk was buying the long-bond like gangbusters. 1. What effect to you think this might have on the the money supply?; and, 2. What effect would this have on the 30-year Treasury interest rate and how might you suppose that would affect mortgage rates?
That's what I'm getting from it too. A decision that had to be made. The other option was a complete collapse of the US monetary system.
you bet I'm buying gold hand over fist and I await the Larry Kudlow CNBC fuck ups of the world to kneel before me.............