To: Challo Jeregy who wrote (22879 ) 8/12/1999 5:11:00 PM From: pater tenebrarum Read Replies (2) | Respond to
CJ, the much-lauded monetary policy pursued by the Fed in recent years will likely be condemned at some point in the future, just as the 1920's Fed's policies were condemned by subsequent generations. i recently read a paper AG himself wrote in '66, where he argues against abandoning the gold standard and briefly touches upon the mistakes made by the Fed in the '20's. reading this, i am really starting to wonder how he could allow asset price inflation to get so out of hand in the '90's. the mistake made in the '20's was that against a backdrop of rising productivity, disinflation and technological advances(sound familiar?) the Fed left interest rates too low, flooding the system with money, which created a bubble economy and an asset price bubble. money that didn't find it's way into stocks found it's way into industrial capacity which ended up as overcapacity. now apparently Greenspan knows this, as he mentions all those points in his '66 paper. my conclusion is that he is well aware of the need for tighter money, but that his hands are tied by the politicos who tend to look no farther than the next election day.
