Alan Green$pan is great! There is no more irrational exuberance [other than in the shorts who picked the top]. The wealth effect is long gone. The poor effect is even more powerful than the wealth effect [once a stomach is full, we can't eat anymore, but we can get hungrier and hungrier until we die].
So he avoided the great financial panic of 1998 and Y2K's bug-induced panic turned out to be a fizzer. So he had to raise rates to take the steam out of the economy and maintain the value of the currency in relation to other goods and services.
His primary job is retain the US$ as the paramount means of exchange. To keep it in that hugely valuable position and thus provide a stable means of exchange for the world, he needs to maintain a stable position for it. If it inflates rapidly, it would cause high interest rates and economic instability and it would be abandoned for gold or other useless currencies.
He has done a great job for well over a decade.
The purchasing power of Americans has zoomed compared with New Zealanders and that's because of a strong currency and strong economy. That's good for Americans [and aliens who invest in the US economy, which is good for the US]. US and aliens who invest in the US can go shopping around the world, taking SUVacations to their heart's content. Kiwis and others will happily work for a few $$ cast their way.
Having saved the world in 1998 from a financial implosion as the currencies and economies around the world slipped towards the deflation black hole event horizon, he then had to steady things again, then ensure there was no Y2K collapse. There wasn't and it was a fizzer so he had to quickly start winding in the extra credit and avoid the inflationary risk they had introduced to ensure no Y2K crunch. That meant interest rates up. And up and up. Until the wealth effect suddenly went away with the e-economy collapse into its own little black hole, I suppose precipitated by the credit squeeze.
Anyway, the wealth effect has gone, Y2K bug has gone, the e-mania has gone, the mad margin borrowing has gone. Things can go back to business as usual again. So he is winding interest rates down - a bit slower than they should have done, but I suppose they wanted to get George elected so were happy for a bit of an economic squeeze to ensure the Clinton/Gore duo couldn't claim the credit going into an election.
Now the interest rates are coming down with a rush.
So it seems that good old Alan, my idol, has got it all about right. He is cutting my high interest rates right on cue. Thanks Al. I love you.
Now I will enjoy my stocks zooming away, up, up and away!! it won't be a wealth effect zooming because so many people are chastened and the .coms won't zoom away any time soon. The real stocks such as QUALCOMM will be the winners - those with something real to sell which won't be hurt in a minor recession when luxury spending is knocked on the head.
Go Al Go. I bet Bush likes him too!
Mqurice |
