Easy Money? Jay, interest rates were so high people were whining like a fleet of 747s. That doesn't sound like easy money to me. The growth rate in the money supply wasn't even especially interesting over most of the 1990s.
There was the 1998 Asian Contagion and the Globalstar Zenit Butterfly going down in the Siberian Forest which did NOT fall silently, although nobody actually heard it and they didn't even know for sure it had crashed - the launch team reading from the script rather than reporting telemetry data which the satellite managers couldn't find coming out of the sky.
Anyway, the Globalstar Butterfly crashing started a hurricane in the world's financial markets, which were already primed for failure and hiccoughs had begun. Long Term Capital Management's overly leveraged position, supported a mile high by a Globalstar Butterfly, came tumbling down, threatening to start a cascading collapse.
Panic on Wall Street and a few urgent phone calls got Uncle Al into gear and Long Term Capital Management's assets were managed into a market clearing process which included a large dollop of Uncle Al support.
You probably missed it, but the Globalstar people were drinking champagne to celebrate a successful launch for perhaps half an hour after the Butterfly had already crashed into Siberian forest. Then, it gradually dawned on everyone that there was NOT going to be any telemetry data coming in and the satellites did NOT show up as planned over South America and the financial foundations of swarms of investors and leveraged derivatives gamblers had gone.
Then, there was the Y2K worry, which seemed silly to me as major problems don't arrive with a decade or three of warning. I thought it would be a fizzer and so it was. But Uncle Al loaded the tills with cash just in cash. Then, when it was shown to be a fizzer, wound it right back tight and kept interest rates up to squeeze the maniacs in the markets who were bounteously irrationally exuberant and Uncle Al and swarms of us knew it. There was squealing and whining about Uncle Al being a meanie with his tight money.
Sure enough, the true Y2K bug was NOT a 00 in a computer but the $$ bug in irrationally exuberant human brains. What a surprise that was! Wow, golly and gosh. Everyone was looking over their shoulder at the 00 and BLAMMMM, from out of the blue they were hit from the front.
New Zealand also had all the liquidity in the world, but we did NOT have an irrationally exuberant stockmarket. That's because NZers still remembered the mayhem of 1987, which was the equivalent of the Nasdaq now [but worse]. The rest of the world didn't experience 1987 as NZ's wildly speculative stockmarket did. Once bitten, twice shy. The timid Kiwi [apart from me] cowered in the bush, peeking out at all the liquidity but not taking the bait. Which shows that liquidity does NOT cause irrationally exuberant markets. The 00 in buyers' brains is what causes it. Further evidence was the difference in the different markets - dot.com, telecom, Nasdaq, Dow, Nikkei [plenty of liquidity there for a decade and with low interest rates too], NZ.
Yes, we do have the job of checking the bubbles. That is exactly my job. My job is to detect low prices and greatly undervalued people, ideas, patents and assets and get the heck out from over-inflated market hysteria before it pops. Uncle Al just provides the measuring stick and maintain a stable value for it and maximize his profit from the supply of those inches. He has succeeded in the most spectacular fashion, admirably.
Never before has such a vast bubble deflated with such limited disruption to the producers of the world. It has been an amazingly orderly retreat to reality. No pandemonium, plenty of tears and bankruptcies but systemically stable.
Uncle Al did NOT enthusiastically endorse the Wall Street exuberance. He did, finally, acknowledge what I'd been ranting about for years, that yes, there did indeed seem to be a real improvement in productivity which was driving the markets with some reasonable foundations. Which was not to say every wacky speculator was going to get rich. That was a conclusion from their own fevered brains.
Okay, that'll do for now.
Case proven,
Hooray for the greatest monetary manager in history. Our esteemed Uncle Al.
Mqurice |
