Limtex, what Greenspan really is, is a very conservative, hard money Fed chairman. He's sort of a closet Gold Standard guy. (Not to go back to the old exchange rate, of course, but to stabalize at a low one.) I say sort of, because with the demonitization of Gold, he doesn't really follow just gold. But what he does do is pay a lot of attention to baskets of commodities, as well as various inflation indexes. The point is, to a large extent, Greenspan's ideal is to keep inflation down to the 1-3% level, neither higher nor lower. Beyond that, he's more or less prepared to let the market go to hell. And let the economy slow down. So long as actual deflation in the U.S., overall, doesn't occur.
Now I think that's his basic mindset, but he's not absolutely doctrinaire. Witness his 1987 action. (Though he may in retrospect regret having acted quite so dramatically.)
He is aware of some chance of a 30's style disaster (if not so dramatic). And will act to prevent that, within his lights.
But I don't think he will want to act so dramatically to prevent a middling real economy recession that while that is achieved, so is inflation. His basic principal is a Gold Standard, converted to modern circumstances.
The point isn't whether you or I like it or not. The point is to recognize reality and act accordingly.
Doug |
