let's make one thing clear: Greenjeans won't surprise the market. since the Fed funds futures are currently not pricing in a rate hike, there won't be a rate hike. they would have already sent the 'hawks' forward with some jawboning for the market if they planned a hike.
look at it this way: all you ever hear from Fed officials is stuff like this (get ready for new error all the way - i especially like Poole's comments on money supply growth - if you should ever chance upon a 10-year chart of M3 you'll have a good laugh...):
“I think the economy can grow at 4% a year or maybe even a little faster. Why do I think that? Because it is has been doing it for 4 ½ years - that is why I think that. If you go to a rodeo and you are riding a bull, I think you only have to stay on for 8 seconds, then the buzzer sounds and somebody helps you get them out and it is all right. Unfortunately, we are in an experiment here - we have been on for 4 ½ years and people still have not been acknowledging what is right before their eyes. The buzzer is not going to go off until something bad happens. That is the problem. The bell will sound when the experiment fails, as long as the experiment is working it won’t sound. So there is no way that I can ultimately win this debate that we are engaged in. Just with my own eyes I can say that (it) is capable of growing at 4% without inflation picking up. That is still a minority view - not as much as a minority view as it was a year or two ago. Most of the people in the technology areas agree with me; I think most of the businessmen agree with me, and there are 2 or 3 maverick economists out there that agree with me--- Larry Kudlow, Brian Westbury, Ed Yardeni---people like that. But the people who don’t agree with me at all are the older establishment economists from elite universities that don’t have good football teams. They still evoke the view that it may be working in practice, but will it work in theory.” Robert McTeer, President of the Federal Reserve Bank of Dallas, July 25, 2000
“What we know about household debt is, one, that, even though the ratio of debt to income has been rising, that the debt-service burdens, meaning the actual monthly payments as a percent of disposable income, have been rising less, although they nonetheless, have been rising in the last couple of years or so, as I recall. There is very little evidence to suggest that rising debt burdens on the part of households per se, are a trigger for an economic recession. Most people have a generally good idea of how much debt they can carry, and they don’t go beyond it. The problem is not that rising debt will create a problem for the economy but that, should the economy turn down, then the high debt burdens could create some significant problems for a number of America’s households. That’s been the typical pattern over the years. Consumer debt has been a remarkably beneficent force in moving people into the middle class in this country over the last two or three generations. And it continues to be a very potent and very desirable financial institution. But you (Representative Melvin Watt) are quite correct in raising the issue that there are potential concerns. The concerns, however, are when a recession occurs, not that consumer debt can create a recession; at least the evidence certainly does not suggest that that’s a problem.” Alan Greenspan, Hearing of the House Banking and Financial Services Committee, July 25, 2000
“So there is good reason to believe that the relationship between money and GDP, or price level, should be more variable and therefore money growth is a less important guide to current economic policy than it used to be. That said, anyone who totally ignores money growth does so at his peril because the fundamental responsibility of the central bank is to control the amount of money that is created. And we have ample reason in history to know that if we let money creation get out of hand – on the upside or the downside – that there is going to be big costs to pay – big cost that the economy will have to bear. And I think what we have seen in recent years is that money growth numbers have never gotten grossly out of line. If you look at the numbers over the last five to eight years there’s been periods when it looks to be on the low side, periods that looked to be a little bit on the high side. But it’s not been grossly off on either direction. I use, look at those numbers but I use it in conjunction with other information we’re receiving at the same time.” William Poole, President of the Federal Reserve Bank of St. Louis, August 2, 2000
“I am quite ready to insist that our situation is far far more stable. We are much less subject to this being a critical period than in many times in the past – many times in the past. We are not dealing with the upset that we were about the time of the Asian crisis. Things were moving pretty fast back then, and we were watching the data really carefully. There were a lot of peculiar things going on. And we don’t have that in the economy today. We’ve been through a pretty big increase in energy prices. But that all seems to be sort of shaking out and settling down now. So I would say to you that the current environment is actually more benign, more stable than the run of the mill environment. Certainly, a lot more stable than it was in the 1970’s.” William Poole, President of the Federal Reserve Bank of St. Louis, August 2, 2000
well, ain't it a riot? Utopia is here... |
