BBG,..Re:.!!!! If Greenspan didn't do what he could to keep inflation and the market within reasonable check... we would have market swings like they do down here (Argentina)
Amazing that citizens of other countries have a better grasp on the functions of the Fed than some US citizens.<g>
The most puzzling thing to me is that first, anyone takes a possible rate hike personally given that interest rates were lowered last year because of a global financial crisis which had absolutely nothing to do with US domestic economic conditions.
Secondly, "flight to quality" buying in the bond market last fall, especially after the Russian devaluation sent our long rates to 4.7% and then, because the credit markets nearly stopped trading altogether, the Fed had to reduce short rates to get things going again. And all these low rates in the face of Q4 98 GDP growth in excess of 6%! Unbelievable!
Then when long rates got so low, every homeowner in the US re-financed their mortgages and as a result had some nice spending money. On top of that, crude prices were heading to multi-year lows which put additional money in the US consumers pocket. So what did the US consumer do? SPEND and SPEND. The spending helped out the global economy though it ruined our trade balance. At the same time, the strong dollar helped to keep inflation in check while all this spending was going on. <g> But the status of the dollar has changed and demand has finally produced some increased pricing. I guess the Fed, besides being worried about the spending consumer and all their cash finally had to worry about them getting more spending money from capital gains. <g> Therefore, the recent concern about asset price appreciation. (Apologies to John Rosser for my not believing that the fed was interested in market prices) Guess they had to consider all sources of consumer spending. The consumption graph below shows Steady as she goes upward!
stls.frb.org
Now the Republicans even want the US consumer to have additional money to spend in the form of tax cuts!!! No wonder Alan is concerned now! <g>
But rates are still lower than most of last year and if we went back and compared GDP growth with rates we would probably find that, for the growth we are now experiencing, a 6% or 6.25% rate is about right. This ignores the surplus which may or may not be real. <vbg>
stls.frb.org
According to IBD today, the NAZ Composite is up 20.4% since Jan. 1, the S&P 500 is up 9.1%, and the DOW is up 17.5% since Jan. 1 so all this crying and whining about the Fed taking away wealth is absurd.
Regards,
Lee |
