TM, I disagree with a lot you wrote about Uncle Al. I listened and watched all of his latest testimony and as usual, I was highly impressed by him and he gives me complete confidence that he is on top of things.
People make criticisms about him being vague, mumbling etc. I think the problem is in the high levels of ADHD endemic in the USA rather than in Uncle Al's communication ability [or brain function as some would have it]. I find him perfectly intelligible, reasoning, capable and several other good qualities which I think would be hard to find in another individual. He is streets ahead of the politicians who interview him and I am very grateful that it is he who controls the money system and not them.
I don't believe he is dishonest < He is a complete political animal and unlike Paul Vokler and other past Federal Reserve Chairmen NEVER talks honestly>. Can you give me some examples [there must be heaps if he NEVER...]. I have listened to a few of his testimonies and so far I have not detected any inconsistency.
<This time he made no mention of the fact that this recession has been caused by the aftermaths of a stock market bubble which he created and claimed that the current slowdown is has been caused by the terrorist attack on the World Trade Center. >
That is simply untrue. For a start, he did say that the dramatically collapsed wealth effect was a contributor to the major slowdown in the economy. He also said that the economy is showing surprising resilience given the scale of the wealth effect reduction [and conversion to a poverty effect]. Also, he did NOT create the bubble. It was wacko internuts and telecosmic crazies who bid stocks to absurd heights. You can't stop crazy suicidal wacko terrorists[completely] and you can't stop crazy suicidal wacko bubble investors. He specifically pointed out, again, that monetary management CANNOT EVER repeal the business cycle and the way human psychology works. The best it can do is "ameliorate" the effects.
He did NOT claim that the current slowdown was solely caused by the WTC attack. He pointed out that before the attack, the economy was surprisingly resilient and there were some good indicators suggesting a leveling off. He said that since the attack, there has been a substantial economic contraction in many sectors, though not in housing, which he pointed out would not show up until the October housing data was in and even then the effect on housing would not be fully shown.
It is very obvious to non-economists and anyone who reads a newspaper, or thinks how people would react, that the WTC attack was directly responsible for a large economic slowdown in many sectors [aviation being the most obvious].
< This is just an apology to make it sound like he was succeeding in stopping the economic downturn, but the terrorists ruined his game.>
I think you are off-beam there. For example, unemployment had risen, but was still only around 5%. That's not exactly a big deal. Things were reasonably steady following 18 months of pummeling, techwreck, dot.bomb, dow.down and margin calls.
Here is the juicy bit: <Well the high productivity he was referring to was the high productivity rates that we saw in the late 1990's that caused Greenspan and bull market gurus like George Gilder to claim that we had a "new economy." Over the past few years I had been saying that the new economy was a hoax and this past summer the government revised the late 90's productivity numbers down - so far down that they were no longer high enough to be noteworthy. After that action it became impossible for anyone - except the most ridiculous such as CNBC's Lawrence Kudlow - to claim that there ever was a "new economy" productivity miracle.
Up until today Greenspan has said that we would return to the productivity rates of the late 1990's and that fact would make the economy recover quickly and grow fast once again. This is the first speech he has given since those numbers have been revised down that he shunned this theory. By stating that we would return to the productivity rates "preceding 1995" he made it clear today that he no longer believes in the "new economy" theory. He has to or else he'd look like a fool. But he'll never admit that he was the most prominent proponent of this hoax. He just made the biggest flip flop of his public life. And for Greenspan that is saying a lot.>
I don't believe he has been a 'new economy' aficianado for long. It was only about two years ago that my bleating about the technological developments which are surging around the world making huge changes to productivity was a lonely sound. Suddenly, it became conventional wisdom and Uncle Al started agreeing with it too, but always it seemed to me in a restrained way [unlike my wild enthusiasm].
Like you, I picked up on those remarks he made as being the interesting bit.
The definition of 'new economy' needs to be agreed before we can make a lot of sense; maybe different people have different ideas about just what those words mean. The dot.com crowd thought it meant profits could be ignored while eyeballs were captured and expansion roared ahead.
To me, 'the new economy' means the vast application of a horde of new technologies, in a globalizing world, with stupendous improvements to the way of doing things and doing things which could never be done. All this freeing billions of people from 20th century and 19th century agrarian lives of penury. Jay Chen started life in a communist shack with plastic windows [a luxury]. Now he swaggers around cyberspace and cruises the stratosphere in a 747, organizing international capital flows and vacationing in exotic locations. There are vast changes around the world along those lines for millions and billions of people. That is a New Economy.
The Telecosmic cyberspace revolution hollows out the old Gordian Knot of twisted pair and vast monopolistic bureaucracies, the profits going mostly to the producers of those new technologies which enable that, which shrinks the GNP because a LOT can be done with a few ASICs costing not very much. But that doesn't mean there is an economic contraction. The people who were working and producing GNP in the old-style telecom industry can now be deployed into something useful, such as developing the next great thing.
Meanwhile, the new technology producers enjoy vast profits [because they have created such as huge consumer surplus]. Also, the people who use the technologies get huge benefits even if those benefits aren't translated into income. For example, the ability to get vast supplies of information at our fingertips from cyberspace for negligible cost, or the ability for people to chat to anyone anywhere on a CDMA mobile phone for almost no money which are extremely useful, but don't show up on our personal bottom lines. But those technologies free us to do creative, interesting, profitable things [instead of handwriting letters, licking stamps and searching musty libraries for outdated information].
He went on to talk about the globalized economy. QUALCOMM is proceeding to supply the latest telephone technology to a billion people in China who have only recently had a chance of getting phone service. They are going to get cyberspace mobile phone service soon [in about 5 weeks]. That is a huge improvement to the lives of people in China and to QUALCOMM's bottom line. The people in China who used to hide in shacks from Mao's marauders are leaving the paddy fields for CDMA universities. That is a vast economic productivity increase. There are huge numbers of highly talented people whose lives are limited by the exigencies of survival. The globalizing economy is freeing them. As old industries are destroyed by the new economy companies, the highly talented people in them can get a real job doing something really valuable for 5 billion people, instead of for only a few thousand or million for whom they might have been doing something not very effective in their old job.
I believe the economic productivity is NOT going to revert to the rate of the quarter century before 1995. I think we will see an acceleration as more and more technologies and more and more people and in more and more countries synergistically feed into a globalized civilized technological economic exponential growth.
Alan Green$pan gives me a great deal of confidence. USS Enterprise is as powerful as ever. There are a few redundancies to be built into the system and some security systems to be added. Those are a cost, but they add to the confidence which international investors have in the USA as the manager of their investments. Things are looking good for the future [albeit there is still quite a mess to be sorted out post techwreck].
It really does puzzle me that people are so vehement in their criticisms of Uncle Al. I read what you wrote carefully to see why you [and many others] make trenchant criticism and what you wrote confirmed for me the confidence I have in Alan Green$pan. The USA has produced an excellent investment environment with high levels of security, legal protection etc. Uncle Green$pan is a primary part of that.
He really impresses me with how well he handles the questions, his depth of understanding etc, etc.
In regard to the New Economy, we ain't seen nothing yet!
Mqurice |
