Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : The Naked Truth - Big Kahuna a Myth -- Ignore unavailable to you. Want to Upgrade?

To: Lucretius who wrote (65615)	10/1/1999 7:57:00 AM
From: clochard	Read Replies (1) \| Respond to of 86076

GREENSPAN: THE FED CHIEF IN A BUBBLE By JOHN CRUDELE AMERICA is going to have to do the unthinkable. When the Dow falls to 10,000, Washington will be forced to rig the stock market. Not that this sort of thing hasn't happened already. But the next time Washington will have to be blatant about its actions. OK, maybe 9,500 is the critical support level for the market. Or 9,000. But my point is that the problems of the world's financial markets are getting so intense and complicated, with so many cross-currents and conflicting interests, that the solutions are almost unfathomable. It's like someone trying to cover a bed with a sheet that's too small. Move the sheet in one direction and another area becomes exposed. Alan Greenspan is the maid with this impossible task. The price of gold was the latest problem to become uncovered. Before that, it was the dollar. Before that, bonds. Simplicity is now the best solution - rig the stock market and get it over with. The mechanism is already in place. The Wall Street Journal told us a few years ago that something unofficially called the Plunge Protection Team is at the ready. The paper didn't understand the importance but it did have the information. And the Journal also innocently told us that Peter Fisher, a bigwig at the New York Fed, is in constant contact with Wall Street traders, presumably waiting to head off trouble before the markets in the U.S. even open for trading. Hong Kong has already rigged its markets. So has Taiwan. And Japan did it constantly - but quietly - during its last boom. It's a trend. While rigging the market may be totally un-American, it will be necessary. The Dow is already down 10 percent in recent weeks - the threshold for a major correction. And while that might not sound too awful, it really masks the weakness. Segments of the broader market have collapsed this year and investors have already suffered big losses. The biggest worry these days is that the stock market will decline precipitously and scare the beejezzuz out of regular Americans. Consumer confidence is already dropping sharply. And the surest way to kill the market would be to continue raising interest rates. That's why there won't be another hike next week. Still, the Fed will need to boost rates again soon possibly because inflation is perking up, or gold's rise can't be stopped, or the dollar can't be strengthend through fiddling with the market or all of the above. Can't raise, can't cut - that's the Fed's predicament. Whatever it does will address one problem but cause another one to get worse. Alan Greenspan is - as the cover of The Economist said this week - trapped in the stock market bubble. And he knows it. The Fed chairman felt the need to cut interest rates last year because of the Long-Term Capital debacle. But when he did the dollar tumbled and interest rates on the open market soared. The solution is as simple as it is unacceptable - rig the stock market whenever necessary. Fed governor Heller explained it best more than a decade ago this month. "Instead of flooding the entire economy with liquidity and, thereby, increasing the danger of inflation, the Fed could support the stock market directly by buying market averages in the futures market..." It's an idea whose time has come. Now pick a number. Dow 10,000 or 9,000?