There you go again Mike <by the myth of Greenspan I mean the belief that Greenspan will bail out the market and make it go up. People believed this because he bailed out the stock market in 1987, the S&L crisis in the late 1980's, Mexico in 1994, Asia in 1997, International bankers with bad loans in Latin America and Russia in 1998, and the Long Term Capital Management hedge fund in 1998. He has bailed so many people out in the past - and with apparent success - that people assumed that he could do it again and again. And he encouraged this belief.
But when that belief ends then the myth of Greenspan will end and that sets the market up for another reason to panic... >
Uncle Al has not suggested in the slightest that he has any interest in bailing out crazed investors. He was the one pointing out the risks of irrational exuberance back in 1996. He raised interest rates in a futile effort to extinguish the madness. When the jig was up and the falls were established, he rapidly lowered interest rates in the fastest reduction ever because he knew that there was then great risk of financial implosion.
He was doing all he could, by pumping money like a firehose full of fuel and lowering interest rates to near all-time lows, to avoid collapse. He has obviously succeeded. We are now two years into the declines and most shares with little holding them up are nearly at zero [compared with their irrationally exuberant Y2K peaks] though the now gently descending curves suggest there is room for more decline although 95% of the wishful thinking has been extinguished. After two years of tidying up, we are unlikely to see a collapse inside the event horizon leading to a depression and black hole.
I have not seen any suggestion that Uncle Al would bail out the share market [other than by the sensible actions he has taken so far, which were to stabilize the financial system and maintain the value of the US$, not to reward shareholders for their foolish decisions].
I have explained why prices rose to irrationally exuberant levels before and that that process requires no increase in money supply, but you seem not to want to understand that, so I'll not belabour the point again, though you repeat again and again the falsehoods against our most great and admirable hero, Uncle Al, who has saved the world from financial implosion.
Mqurice |
