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Strategies & Market Trends : Fidelity Select Sector funds
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To: Dennis who wrote (3417)2/21/2001 3:22:32 PM
From: Peter Speyer  Read Replies (1) of 4916
 
Alan Greenspan said it in a 1996 speech. I've seen the clip replayed several times over the years--I'm surprised Mary Farrell doesn't get better research. It took me about two minutes to find it on the net. Here's the speech excerpted below, and a link to the entire text:

federalreserve.gov

"Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade? And how do we factor that assessment into monetary policy? We as central bankers need not be concerned if a collapsing financial asset bubble does not threaten to impair the real economy, its production, jobs, and price stability. Indeed, the sharp stock market break of 1987 had few negative consequences for the economy. But we should not underestimate or become complacent about the complexity of the interactions of asset markets and the economy. Thus, evaluating shifts in balance sheets generally, and in asset prices particularly, must be an integral part of the development of monetary policy."
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