Since there's no Rap today, thought I'd post a favorite excerpt (this one from February 7th, at the height of the mania):
"Rubin warns of risky business... What I find most interesting about last week is that apparently the
speech Bob Rubin gave to the London School of Economics last Wednesday was not really picked up in
the popular press in this country. I guess I'm not really surprised, given what he had to say. It sounded
more like something I or other skeptics of the new era might have said, but nevertheless it's somewhat
shocking that it wasn't splattered all over the newspapers. So I will reprise it here, quoting from
Bloomberg News:
"The chairman of the executive committee of Citigroup Inc., the biggest U.S. financial services company,
said the world faces `serious and continuing' danger of another economic crisis like Asia's in 1997 and
1998. Threats to wider world trade, the growing gap between rich and poor nations and unwise
investments based on the idea that new technology will ensure prosperity all could set off such a crisis,
he said.
"Rubin attacked the premise that the new computer technology that's boosting U.S. productivity removes
the risk of investments. `We face an era of great economic opportunity,' Rubin said. `There are no
guarantees. There are real risks, and there is much to do in both the public and private sectors.'
"He said been `struck' since returning to New York about the pervading `assumption that all will always
be well' in financial markets. Instead, he said, investors would do well to consider increasing risks.
"`Record trade deficits, tight labor markets, exceedingly low personal savings rates and stock valuations
dramatically high by any conventional measures, are all dismissed as minor caveats to the positive
outlook of the U.S. and global economies instead of being seen as possible - not certain, but possible -
excesses and imbalances that may pose real risk to our economic well-being,' Rubin said. `The risk is
that at some point the excesses may simply become too great, and the inevitable consequences follow.'
"The idea that new technologies can erase business cycles is a myth, Rubin said. `New technologies
are of profound importance, but they are not the first new technologies of significance,' he said. Autos,
electricity, railroads and medicine led earlier productivity booms, he said, and `none of them, separately
or together, produced one-way prosperity.'
"Also, he said the ratio of real income per capita in the world's richest nations compared to the poorest
had widened to 60-to-1 this year from 10-to-1 in 1900. `When all the consequences of inequality are
considered, it is in fact a major threat to economic well-being of the global economy,' Rubin said. It
`creates understandable alienation and anger. At home, that can lead to crime, drugs and other social
ills' such as damage to the environment, illegal immigration and disease.'"
Now I suggest everyone read again what Rubin had to say. This is not me talking. This is a man who
knows better than others what kind of a house of cards has been built. When Rubin was in Treasury,
everyone gave him tremendous kudos for all the things that were engineered just right. He had the
incredibly good sense and foresight to get out of town before all this stuff turned to big trouble. Now he's
chosen to warn folks about the risks and no one bothers to pick it up in the press. It's just perfect, isn't
it?
In the mania chronicles... A reader sent in the following story, noting: "First there were dart-throwing
monkeys choosing stocks that could only make money. Now we are wiring plants with electrodes to
pick winning stocks." Apparently an artist attached electrodes to a specially wired yucca plant and
hooked it up to a computer that can trade the Swedish stock market. The plant gets water and food
when it makes a profit. The fellow's claim is that he made 18 percent in the last three months. So not
only do we have everyone levered up and schoolchildren and college kids trading stocks; now we've got
the plant kingdom trading stocks. To say that "everyone's in" would be a mild understatement. |
