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Politics : Ask Michael Burke
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To: Shane M who wrote (41435)12/30/1998 9:07:00 AM
From: Mike M2  Read Replies (1) of 132070
 
Shane, I post this link occassionally it is what Alan Greenspan had to say about the Fed's easy money policy during the 20's fame.org IMO the current excesses of the present bubble are far worse than the 20's there is no doubt in my mind it will end in disaster the question is when. The trouble with a bubble economy is it distorts the demand and output structure in a manner which is not sustainable. In SEA and Japan the easy money was put into industrial capacity to the point of excess capacity. In the US we see a debt fueled consumption bubble. The wealth effect of the stock market has encouraged consumers to spend more and save less. Over optimism leads to over indebtedness. Few people recognized the SEA bubble many referred to it as the Asian economic miracle. There is much talk about the lack of cpi & ppi inflation -the same talk we heard in the 20's and Japan in the 80's . The inflation of the 20's was in financial assets. One point that many overlook is that a credit bubble needs an everincreasing expansion of credit to maintain its stimulative effect but eventually this debt must be paid by the debtor resulting in less consumption in the future or by the creditor in the form of default. Another subject that I want to address in the future is the role of loan securitization in this unprecedented credit bubble- it has sown the seeds of disaster. Mike
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