PRESIDENT GEORGE W. BUSH Message Board

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Politics : PRESIDENT GEORGE W. BUSH

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To: Kevin Rose who wrote (135377)	4/4/2001 12:51:31 AM
From: Nadine Carroll	Read Replies (3) of 769670

Kevin, AG cut by 1.5% in the last 13 weeks, and I'm sure he will cut more -- until it's plain that he's pushing on a string or the dollar blows up. The problem is not that he tightened too fast (he tightened very gently) or that he failed to cut enough, but that he allowed a bubble to form in the first place. Remember that he controls not only the price of money but also the supply -- and he's been printing like no tomorrow. M3 (broad money supply) has risen by 50% in the last 5 years. This flood of credit flowed directly to financial assets and real estate; it funded the bubble. It's the job of a central banker to prevent bubbles, not enable them. Once it formed, it was inevitable that it would burst at some point. It could have burst during the LTCM crisis of 1998, but Uncle Al came through with three emergency rate cuts and 'saved the market'. Can we say "moral hazard"? Thus 'protected', speculation continued unabated. The Nasdaq highs made the 1929 speculation look like child's play. To say at this point, 'Save the market, cut interest rates', is like saying 'Avoid hangovers, stay drunk.' It's not a permanent solution.

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