Chuck,
Nice read.
"Greenspan has been dead wrong on his predictions for inflation, economic growth rates, and unemployment rates every single
quarter for more years than I can remember."
ipsmillennium.com
"Something needs to be said about the inflation numbers we are seeing. I've been saying for years that there isn't any inflation, and I've been right. Nevertheless, this time there really is some inflation. It's
only a blip, and it probably won't last more than several months, but for the first time in a decade, it's real inflation, vs. a simple supply/demand imbalance in goods and services.
Know why? The Federal Reserve caused it, that's why. Recall what happened in the Fall of 1998, when the failure of Long Term Capital Management, and the bonehead Nobel Laureate economists there who
viewed the economy as a machine instead of an intelligent system, convinced the Fed that they should flood the economy with money to bail out the fools and their private bankers. I can hardly feel sorry for
anyone foolish enough to give an economist money to manage, but it hurt a lot of innocent folks as well. The bailout probably wasn't necessary, and shouldn't have been done in any case. It violated the principle
of moral hazard, which is when you bail someone out every time they do stupid, risky things, they don't have any incentive to do smart things. All that extra money from the financial system went into pushing up
stock prices. The government short-circuited the messages sent by the free market system that serve to discipline participants so they don't take the kinds of idiotic, extreme risks that LTCM did.
In 1999, Greenspan again decided to flood the economy with money. This time his excuse is that he somehow got convinced that Y2K would end civilization if he didn't. For the first time since the late 1970s and
early 1980s, the government pumped so much excess money into the economy so fast that it created a supply/demand imbalance in the money supply. Since money is our medium of exchange, this is translated
directly into inflation.
Fed-created inflation.
This wasn't lending created by the private sector for productive capacity expansion, home loans, new employees, R&D, productive efficiency gains and all the other things that private, non-financial borrowing is
for. It was lending by financial institutions for pure gambles, and it caused the huge, 4-month spike in stock prices that began in October last year, and peaked on March 10, 2000. It sucked a lot of folks into the
stock market, then spit them out.
The halfwits at the Federal Reserve are so ignorant, they caused the very thing they claim to be fighting. Now, of course, they are raising interest rates and sopping up all that excess liquidity in a heroic attempt
to fight off the evil inflation monster. And driving stock prices down into the bargain. They have scared people half to death, dramatically increased the volatility and risk in the stock market, and caused inflation
and an asset price bubble that lost a lot of money for folks, at least temporarily. Greenspan has been dead wrong on his predictions for inflation, economic growth rates, and unemployment rates every single
quarter for more years than I can remember.
And he still has his job. For bureaucrats, there are no personal consequences, no matter how badly they screw up."
Scumbria |
