*** Hooray for Uncle Al, KBE *** news.bbc.co.uk
I won't repeat this again: Message 17834302 but for the full story, it should be reviewed.
Carranza, thanks for offering me the opportunity for another paean about our latest [soon to be] Knight Commander of the British Empire.
Leaving aside that fact that the mindless Zombie automatons apparently couldn't think for themselves and needed Uncle Al to do their thinking for them, there is another factor which you should consider.
First though, have people really become so mindless that they are dependent on Uncle Al and the government to do their thinking for them? Do you include yourself in the mindless Zombie crowd? I suspect that if everyone answered the question, they would themselves deny that they were mindless Zombies, it was all those other people who couldn't think for themselves and needed Uncle Al to do everything for them.
All those who blame Uncle Al are admitting that they themselves were mindless Zombies, in thrall to the mobs of irrational exuberants who were bidding prices to the sky. If they could see it all for what it was, how come they aren't all rich now from shorting the market? A few will be able to claim to be rich and have also asserted since 1997 that the markets had gone nuts - but they might also be just lucky. Lucky and smart are indistinguishable in the markets. People are smart, until they are unlucky [or can blame Uncle Al for being an exogenous variable - "Yeah, that's the ticket, I wasn't a stupid moronic mindless Zombie; Uncle Al made me do it."]
Anyway, the other point to consider is that Uncle Al's brief is to maintain the US$ with constant purchasing power, but with a slightly positive inflation rate. It isn't attached to anything other than itself as a control. Its only attachment is to the political will and skill in maintaining it as a constant yardstick for measurement of value. It doesn't represent a lump of gold, collection of shares, or ownership of any other asset.
So, to maintain it as a constant yardstick against other things, it needs to be constantly fiddled with to maintain inflation at between 0 and 3%. There can be plenty of argument as to what should be in the basket of goods and services included in the pricing measurement. There can also be lots of argument about hedonics or whatever the jargon is for increased functionality for a phone when it is a mobile cyberspace cerfing gadget as well as a phone instead of a fixed wind-up party line gadget on the farmhouse wall.
I think the basket of goods and services should be the average hourly rate of people in the USA [or maybe around the world since the US$ is a global currency]. Ignore prices of goods and services and just measure how much an hour the median wage is and maintain the currency fixed against that. But that's a separate issue.
Back to the inflation rate as the primary job of Uncle Al. Through the late 1980s, there wasn't any inflation. There was more serious worry about deflation and that remains the primary concern. Deflationary implosions are very scary and economically destructive.
You say Uncle Al should have increased interest rates even more than he did. They were right up to 8% or so. The US$ was way high so people were squealing like pigs and whining like 747s about interest charges and export problems [from the USA]. Inflation was near-zero. Deflation was a serious risk. Still the mindless Zombie mobs came with their money and irrationally exuberant dreams of 'get rich quick' from around the world and across the USA.
The mindless Zombie mobs bid prices higher and higher and higher. The US$ was way up in the Big Mac Exchange Rate Pricing Mechanism. economist.com Inflation was zero. Interest rates were high.
So, what would you have done? Raised interest rates even more and told people that you had determined that overall share prices were too high and would raise interest rates, reduce margins allowed and use wild-eyed language to convey how nuts the mindless Zombies were. That would have caused the US$ to go up even more and cut US exports even more and cut prices of imports causing the deflationary spiral pressures to build. Meanwhile, the mindless Zombies would have gone right on bidding prices up, because they didn't really believe Uncle Al anyway, despite his unease about the financial stability of the world and concern about irrational exuberance.
So, one day, the bubble would have burst as reality and wishful thinking collided head on and reality, as always, won.
I think "Ohmigod!" is about all you would have been able to offer as the deflationary collapse happened all in the space of a few weeks. Panicked slashing of interest rates wouldn't have stemmed the panic. Bankruptcies, mass unemployment, depression would have happened in a cascading deflationary implosion beyond the event horizon into the biggest black hole ever, with 6 billion people sucked into the maw.
What then?
The way our great an admirable hero played it, he accepted the fact of the wealthy [or those with a bit of cash and credit] going nuts in a market bubble of infectious greed. Meanwhile, he screwed interest rates up only high enough that the real economy could keep ticking along, without excessive distortion. Then, when reality dawned, he immediately roared interest rates down and the dyke held.
The irrationally exuberant mindless Zombies lost their money and went back to work. The real economy kept on zooming along. The greed-infected Enron, Global Crossing, Globalstar, Worldcom, L M Ericsson and other corporate high-flyers founded on wishful thinking, debt and faulty business management came crash-landing. But the dyke held. Out on the street, nothing much was noticeable, though traffic jams around San Jose eased and "For Sale or Lease" signs went up. Pay packets shrank. Options expired worthless. Re-employment became common.
The capital of the irrationally exuberant was lost. Retirements ended. People went back to doing something productive. They stopped spending on frivolous luxuries.
Those with capital can afford to lose it. They are the risk-carriers of society - which is why they were investing in risky get-rich-quick ideas with profits somewhere over the horizon in blue skies. That's why $ill Gates is giving away $$billions to try to fix intractable problems. That's why Irwin and Joan Jacobs gave money to the university engineering department in San Diego.
The capitalists' job is to be risk-carriers and human sacrifices, who, if they are successful in their uncertain ventures, make a lot of money and carry humanity to greater achievement and quality of life, or, if they fail, are sent back to the coal mines to do more real work of certain value. Usually, said capitalists don't risk all their money - they don't really want to go back to the coal face.
They risk only a proportion of their wealth. They put the fizz in free enterprise and are why the capitalist west beat the socialist east. Socialists simply muck things up, spending other people's money in clueless ways and when it invariably goes wrong, because there's no love or brainpower behind the spending, they go [or stay] down the gurgler.
The wild west on the other hand doesn't lose overall; just the risk takers and greed-infected go down the gurgler. Or, alternatively, they enjoy wild success [such as Yahoo!, QUALCOMM, eBay, Samsung, Microsoft, Intel].
So, Uncle Al, KBE, has managed the world through the events of 1987, 1991, Mexico 1995, Asian Contagion and Globalstar/Long Term Capital Management, Y2K and now, the greatest achievement, the World's Biggest Bubble Implosion with the Twin Towers destruction to really dramatize the situation.
What does he get? Whine, whine, whine, like a fleet of bloody 747s. The sound of Koreans whining about CDMA royalties is nothing compared with hordes of whining American mindless Zombie spoiled-brat baby-boomer losers who can't spell looser's - or even, just to poke a bit of borax, 'irrationally exuberant'.
Mindless Zombie people who can't spell looser's or irrationally exuberant shouldn't be telling our great and wonderful hero, Uncle Al, KBE, how to run the money supply.
Okay, I'm being overly vituperative, but many people say much worse things about our greatest idol ever, Mr Green$pan, KBE, so that's for them!
Uncle Al is indeed like Charles Atlas and NOT a 90lb weakling. But Atlas looked at the greed-infected mindless Zombie mobs and shrugged, going back to minding the till, keeping the money in good condition and the economic foundations sound.
Mqurice
PS: Now, about your banning. Consider yourself banned until, oh, let's say lunchtime [that's in half an hour]. You can call yourself Sir Carranza, BBM [Banned By Mqurice - In cyberspace, the Sir is included as 'countries' have no meaning]. You are first with the honour conferred, which is an honour in itself. |
