Checking in again jfred, and deflation has had the official death knell sounded. It took 5 years, which was about 3 years longer than I'd thought, to go through the Biotelecosmictechdot.com market-clearing, margin-mangling, crunch, through the low interest rates and petapixelation of umpty billion new US$, to Utopia.
<WASHINGTON (Reuters) - Federal Reserve Chairman Alan Greenspan said on Tuesday that U.S. companies were regaining the power to raise prices and that a long period of worry about the potential for deflation was over.
"It's fairly apparent that pricing power is gradually being restored and, as I'll indicate tomorrow, threats of deflation, which were a significant concern last year, by all indications, are no longer an issue for us," Greenspan said, answering questions at a Senate Banking Committee hearing.
Bond prices sank, with traders interpreting Greenspan's comments as indicating an increased likelihood of a near-term increase in interest rates.
"The inflationary pressures will be reasonably well contained so long as productivity is moving at a reasonably good clip and unit labor costs, as best as we can judge, are still going down," Greenspan said.
In his prepared testimony, Greenspan said he thought banks were well-positioned for higher interest rates. His prepared testimony dealt exclusively with the banking industry but he will discuss the economy before the congressional Joint Economic Committee on Wednesday.
"All told, the available data, industry and supervisory judgments, and the long and successful experience of the U.S. commercial banking system in dealing with changing rates suggest that, in general, the industry is adequately managing its interest-rate exposure," Greenspan told the Senate Banking Committee.
"The (banking) industry appears to have been sufficiently mindful of interest-rate cycles and not to have exposed itself to undue risk," he added.
When asked about rising commodity prices, which have raised some worries about price pressures in financial markets, the Fed chief said inflation would remain reasonably contained so long as productivity growth stayed strong. ... continued... >
reuters.com
There was no cascading collapse through irrationally exuberant margin accounts and Bubbleonia, despite severe bonus events such as the destruction of the Twin Towers and all that entailed.
As expected, my estimable idol, Uncle Al, KBE, knew just what to do and has done it. He was backed by Clinton and Bush who had the good judgment to leave him to it. The USA has got some good stuff going for it.
Now we just need to go through the interest raising process, which is the easy part, unlikely to lead to a sudden implosion as it can be done softly, softly, sufficiently to keep inflation in check.
Now, companies with no debt and with big piles of cash in the bank, like QUALCOMM and Microsoft will separate from the heavily indebted companies, which will find it more difficult to pay their bills and which will suffer reduced profits. QUALCOMM and Microsoft will enjoy bigger profits from higher interest income.
These are the good old days,
Mqurice |
