Mucho, I'm much too long in the tooth to glance at a single contextless quote and call it a decision I've made. But it's a start. I don't know anything about him apart from that quote, which was off-beam, so he's already got a negative totality in my book. I'd read and think a lot more before declaring that to be a reasonable summation.
Money growth rate during the 1990s was not at all immoderate. Interest rates were so high that the dollar roared up to untenable levels. Even after the biggest and fastest interest rate cuts ever, the dollar is still sitting up fairly high. That is because his currency is considered robust. People are not prepared to bet against it.
Has a good chance of destroying the dollar? I do understand why the bubble happened. I was there, with margins, with buying and selliing and seeing close up and personal what went on.
Many people I know from NZ, Taiwan, England and elsewhere bought US$ and then bought stocks at high prices. They didn't use easy credit, so credit creation was irrelevant. They used their cash. They bid the prices up. People bought at the top. People thought that a few shares traded at a peak meant that market capitalisation total was real wealth they had.
So many people are unable to understand what happened that I am now convinced I shall make another fortune from their ignorant herd mentality on the way down. They will blame Uncle Al because they don't like their own decisions.
Perhaps you could define the words 'easy credit' you used so that we have meaning attached to words. It's impossible to have discussions if words are meaningless.
From all I've seen and heard, Green$pan has got a better grip on what's going on than anyone else. He is perfectly intelligible to me when he speaks, which makes me think those who don't understand him have the problem in their receiving department, not that Green$pan has a transmit difficulty.
I am looking very carefully for anything to make me think I might be wrong and have yet to see it. When I read critics' comments, they are the ones who seem to me to have a screw loose, not Uncle Al.
They seem to ignore the fact that beings with independent minds made buying decisions at the peak of the markets and bought. Those few buyers defined the market capitalisation. Those buyers were manifesting their own free will, independently of Uncle Al, using their cash and credit. Some, like me, were using credit, but I bought, not because the credit was available but because I saw what I thought was a bargain.
So yes, the credit available allowed prices to rise more than if no credit was available. But if no credit was available, interest rates would have been much higher and the US$ much higher as a result. The question was how much credit was reasonable to make available?
Interest rates, inflation and economic activity were all at reasonable levels. It was just the wild and crazy dot.com, telecosmic and Dow buying mania with irrationally exuberant infectious greed which zoomed share prices way up. Margin levels could have been wound back and that was done for dot.com manic stocks - brokers issued lists of shares for which no margin was allowed [because they knew they had no visible means of support and could step to zero overnight].
95% of the bubble was due to buying decisions, not easy Al and the Green$pan put.
I have been betting since 1997 that Uncle Al would revive some inflation and do a big printing when the bubble burst, slashing interest rates and ruining creditors. So far, we are on plan, though the crunch has been much more than I imagined [for the Nasdaq anyway]. But I still don't think we're heading for a US$ destruction. Especially now that the vast bulk of the Nasdaq has been deflated and the Dow has been tidied up a lot.
My fear was of a WTC type collapse, but that now seems very unlikely to happen since 2.5 years of market clearing has been going on.
Mqurice |
