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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: ahhaha who wrote (45526)11/16/2005 8:28:09 AM
From: Chaka  Read Replies (2) of 110194
 
Ahhaha, thanks for your reply. Since I am no economist, some of what you say escapes me but at a very high level, it doesn't seem from your response that what Hussman is saying ("the fed is irrelevant") is wrong over the long term - you seem to say that Fed has several other controls that it could use in the short term to maintain control but this option is not viable over the long term if the market pulls in a different direction? Given what happened in Japan in the 90s, it appears his opinion has some validity - lowering the funds rate to arbitrarily low values may not necessarily increase loan demand.

Another article where he talks about the different approaches of Volker and Greenspan here...

hussmanfunds.com

<...
Consider Paul Volcker and Alan Greenspan, both very successful Fed Chairmen in the context of the challenges that each faced. Though they followed very different policies, they shared one thing that was absolutely critical to their success – their policy target was something they could actually control. Volcker chose money supply targets. Greenspan chose Federal Funds targets. Importantly, these are essentially the only tools available that the Fed directly controls. By choosing one, you essentially have to let go of the other – allowing it to be a “slack” variable that does the job of adjusting to various shocks in the economy.
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