*** Alan Green$pan's Testimony to Congress ***
federalreserve.gov
Alan's December 1996 comments about the need to identify irrational exuberance were relevant in early Y2K.
< ...By early 2000, the surge in household and business purchases had increased growth of the stocks of many types of consumer durable goods and business capital equipment to rates that could not be sustained. Even though demand for a number of high-tech products was doubling or tripling annually, in some cases new supply was coming on even faster. Overall, capacity in high-tech manufacturing industries, for example, rose nearly 50 percent last year, well in excess of its already rapid rate of increase over the previous three years. Hence, a temporary glut in these industries and falling short-term prospective rates of return were inevitable at some point. This tendency was reinforced by a more realistic evaluation of the prospects for returns on some high-tech investments, which, while still quite elevated by historical standards, apparently could not measure up to the previous exaggerated hopes. Moreover, as I testified before this Committee last year, the economy as a whole was growing at an unsustainable pace, drawing further on an already diminished pool of available workers and relying increasingly on savings from abroad. Clearly, some moderation in the pace of spending was necessary and expected if the economy was to progress along a more balanced growth path. ...>
That says there was irrational exuberance and an asset price bubble, in different words. He did call it 'euphoria' in another part.
His testimony is a good read and all is going according to my plan. Soon, the markets will have bottomed and things will get back to 'normal' though the Fed thinks there will be further economic slowing before things round out at the bottom. Maybe - it does seem likely. But there is a lot of mayhem already priced into a lot of share prices.
Brrmmmmmm!!
Mqurice
Dow 16,000 Feb 2002
PS: Hello NZL! |
