>> But is it an emergency if stocks go down from here? No, I cannot see AG being unduly concerned about current stock prices -- they are still high. <<
Well the problem is, plummeting stock prices will affect the economy a lot more than you think. Unfortunately the economy is now tied to the market and Greenspan has to prop up stock prices to keep the economy from falling apart. He has kind of gotten himself into a bind, with his foolish policies of the past. (I have not been a fan of Greenspan for a long time).
>> The market is looking for emergency relief -- and the market is likely to be disappointed <<
The part I don't understand is why you think it is so terrible to cut rates? Cutting rates will help the economy. It will not serve to instantly inflate the IPO market again so new companies like TheGlobe.com and IVilliage can go public for billions of dollars.
>> The S&P can drop anther 10-20% from here and there would still be nothing you could call an "emergency". <<
The S&P could also move up 10-20% from here and not cause an emergency either, so what is the harm in a rate cut sooner rather than later?
>> The problem is not that I want to have it both ways - the problem is that the bulls want it both ways -- an emergency response when the only "emergency" is the falling stock market <<
You just said that the only emergency is a falling market. But just a few sentences before that you said: "The NAPM data this morning says recession is increasingly likely." You just did it again! Which is it? Is the emergency a recession or a fall in stock prices? I would argue that if it is a recession, then Greenspan needs to act sooner rather than later. It seems to me that you think Greenspan should not act because people need to be taught a lesson about speculating, even if he lets the economy fall off a cliff to make his point. I would argue that most of the foolish greedy investors and speculators out there have been taught a lesson already, and Greenspan doesn't need to derail the economy in an effort to teach everyone a lesson.
Here's a novel idea. Why doesn't the Fed cut rates 50 basis points to signal to the markets that he doesn't want to kill the economy in an effort to wring out speculation, and at the same time raise the margin requirements? I think that would be a reasonable thing to do and would be fair to everyone involved.
>> Will AG bail out investors at these prices? Why should he? <<
Should Alan Greenspan punish blue collar people who work 9 to 5 jobs by letting us slip into recession, thereby causing massive lay-offs and unemployment? All in the name of wringing out excess speculation from a handful of four letter stocks? Greenspan should have raised margin rates a long time ago instead of interest rates and we wouldn't be in this mess. Now he is going to cause a major catastrophe that will effect billions of people around the world just so he can teach some speculators a lesson. If he wanted to teach people a lesson that speculation is a bad thing, then why did he try to jawbone the markets lower in '96 with his irrational exuberance speech, but then not back up his words when the markets continued to blast higher ignoring his warning? Why did he bail out his rich banker buddies in '98 when they got greedy and made risky loans all in the name of triple digit Russian stock market gains? He essentially told everyone that he would be there to bail them out when greedy hedge funds and financial institutions pressed their bets too much.
Now, after '98 Greenspan taught people it was ok to be reckless, I will bail you out when things get rough. He did it in '87 as well right? So Joe Q Public thinks it's ok to buy the dips even more aggressively, Alan Greenspan to the rescue! Now that just about everyone in america got long stocks and wanted in on the fun, Greenspan says "Too bad. Tough luck. Mom & Pop aren't like my rich friend bankers and hedge funds and they aint getting my help. I'm going to let the market and economy sink into oblivion all in the name of fighting inflation!" Yeah right. The only inflation out there is asset inflation, and if Greenspan is so worried about asset inflation then why did he let it get out of hand in the first place! Why didn't he raise margin requirements to stop the bubble from blowing so big from the get go. But to sit there and say irrational exuberance in one breath and then talk about how it's the greatest economy in 50 years in the next breath, and NOW AFTER IT'S TOO LATE decide to kill speculation is beyond me. |
