Frank,
While I will not go quite as far as you with respect to Greenspan ... as most other fed heads would have killed this market off much earlier than '00.
The fed is flying loose at this point and they do not know where the economy is. As stated before, the Fed may push us into a recession as they have done so, many times in the past.
1. We know inflation is low, even if it is trying to poke its head up.
2. The fed has tightend and continues to tighten. Maybe two or three of the previous five hikes are impacting the economy at this point. Meaning the effect of 75 to 100 basis points have yet to slam into the economy much less possible impacts of additional June and or September Fed choke holds.
3. One of the stats that I find quite amazing is that at no point in the 20th century and that includes the stagflation/inflation during the '70's and 80's (when 6 month CD's were paying 18-21% or so) has the difference between the Fed funds rate and the inflation rate been so large. Ergo there is some truth in your statement/feelings. It is rather unbelievable with the economy doing so well, with inflation being so low, with money available per budget surplus, with people finally making it off the welfare rolls to work, that we sit here and watch the fed place a strangle hold on the economy. In the process of killing rather than saving the Goose that lays the golden eggs.
4. I also found Greenspan's statements ref. Freddie and Fannie MAC frightening for the average American that wants to own his/her own home. Mr. Greenspan would like like to kill off these agencies. The median home price in the US is probably under $200,000. Conforming loans run to about $250,000 or so. Jumbo loan rates run .25 to .50 higher than conforming. The key? Freddie MAC backs the conforming loans. Our friendly banks have the jumbo loans to themselves. In essence, if Greenspan has his way, average American's would have to pay more for the same house, get less house or perhaps continue to rent. I will not go into all the positives and externalities that come into play with home ownership and communities and business and the multiplier effect. Needless to say, it is just another way to strangle the economy and the little guy.
In short, be it holding market gains to 6% or less (deny it though he may...the market is a major target), killing off Freddie MAC and thus Ginnea MEA funds which pay more than treasury notes, siding with the banks and in essence blocking large groups of American's from home ownership... makes me wonder if this is why Mr. Greenspan only holds treasury notes. Just what is his real goal? Or is this just an academic exercise in eating peanuts as alluded to during his acceptance speech.
Given our favorable economy and the fact that the Fed can not measure productivity or really pinpoint inflation they digress. Much as a child placed in a threatening situation which overwhelms them ... leading to infantile behavior or an adult that turns to comfort foods. The FED is turning to the only thing it knows. Raise rates. Kill the economy or put it into a recession we really don't care, just make it stop so we can figure out what is going on.
Regards, |
