Mare, your comments on interest rates and the economy are thoughtful and right on. Keep in mind that Greenspan is not above a little jawboning in order to encourage the markets to do his work for him, a process which seems to be well under way.
IMO Alan Greenspan should receive the Nobel prize for economics. His stewardship at the Federal Reserve over the last 12 years has been a major factor, perhaps THE major factor, in orchestrating interest rates, and thus indirectly the economy, to permit an unprecedented growth boom and the resulting inflation in financial assets. The two other factors that might possibly be more important, the reduction in the federal deficit (note reduction, not elimination, re: the SS trust fund) and the high-tech driven productivity increases, people can argue about and both are important. But Alan is "da man". You will see increasing anxiety just prior to the Clinton decision whether or not to reappoint, and if the decision NOT to reappoint leaks, or on the day it is made, the markets will not like it in the least. No one person is indispensable to our economic prosperity, but Greenspan is as close as they come.
Just remember that booms and inflation in financial assets do not last forever. I seem to recall one in Japan circa 1981-1990. When it ended, the Nikei went from maybe 38,000 to under 13,000 over the next few years. Those who think it can't happen in the US would do well to study a little really long-term economic history.
Thanks for your insightful post.
BP |
