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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: russwinter who wrote (20056)10/16/2004 6:49:39 PM
From: Ramsey Su  Read Replies (1) of 110194
 
This Kohn guy is one of the lesser known Fed Governors but he has made a few speeches that are far more revealing of fedthink.

federalreserve.gov

Though the speech is mainly another one of those "in hind sight, we did the right thing and we are the greatest" themes, Kohn came as close to admitting that fed policies created bubbles.

Among other things, we are uncertain (a) about any judgment that the level of a particular class of asset prices is moving far enough away from fundamentals to make a correction inevitable and disruptive; (b) about the timing of a reversal of those prices, so that a step to truncate a movement, say by raising rates in response to a perception that the prices of some assets were becoming unsustainably high, does not increase economic instability by hitting the economy and asset prices just as the reversal occurs; and (c) about the response of asset prices, possibly driven by self-fulfilling optimism for a time, to a change in rates. As a result of this last unknown, one has difficulty assessing whether a change in policy large enough to prevent asset-price disequilibrium would have a greater adverse effect over time on economic performance than would allowing asset prices to evolve.

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