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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: IQBAL LATIF who wrote (29552)	11/3/1999 3:13:00 AM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

House price rises boosted growth, says Greenspan By Gerard Baker in Washington Increases in US house prices over the last five years have played a significant role in the consumer spending spree that has driven overall economic growth, Alan Greenspan, chairman of the Federal Reserve, said yesterday. While the effect on consumption of the massive increase in stock prices has been the focus of most economists' attention, higher house prices tend to have a proportionately larger effect on consumers' spending patterns, the Fed chairman told a conference of America's Community Bankers. Mr Greenspan did not suggest there were any immediate consequences for monetary policy from the process of so-called "equity extraction" but he argued that, since it was usually financed by increased borrowing, it was of increasing importance to the financial sector. The average capital gain on a home in the last five years had been $25,000, Mr Greenspan said. Most homeowners realise that gain, either through sale of the house or through mortgage refinancing. Either way, some cash is released for purchases of big-ticket consumer items. Research by the Fed's economists suggests the "wealth effect", the proportion of the increases in asset values that is spent by consumers, is larger for houses than for equities. About 3-4 per cent of gains in equity values was spent, Mr Greenspan said, while the figure for housing values was about 5 per cent. The reason, Mr Greenspan said, was differences in the volatility of house and equity prices. "While home prices do on occasion decline, large declines are rare; the general experience of homeowners is a modest, but persistent, rise in home values that is perceived to be largely permanent. Mr Greenspan said that the proportion of owner-occupiers among young people had dropped in the last 30 years and he called on lenders to help reverse the trend. Separately, the Commerce Department reported yesterday that Americans' seasonally adjusted personal spending rose 0.4 per cent in September, while aggregate incomes were unchanged from a month earlier. As a result the savings rate dropped to 1.6 per cent from 2.3 per cent in August. Last week the department announced a significant change in the way it measures personal savings. It now counts contributions to the pension schemes of government employees as personal savings, not public sector savings as previously. The change raised the personal savings rate over the last decade, lifting it out of the negative territory into which it had dropped in the last year.

To: IQBAL LATIF who wrote (29552)	11/4/1999 2:01:00 PM
From: Crystal ball	Respond to of 50167

Beware November: Greenspan is only doing this because Clinton is a lameduck! WORK EARN SPEND. No Problem. Variable rate mortgages etc that is the problem. WORK EARN (interest hike) Spend less, get fired, earn less, get foreclosed, spend less, Keynesian Depression cycle!!! There is no problem with high productivity and high wages as long as people spend and buy what they produce. That is harmonic equilibrium and Greenspan does not have any! I dont trust him, Europe, however small the Euro .25% that became .50% hike is perceived in the MAGNITUDE of the US and World economy, that, and that alone is reason for Greenspan to hike rates, he is looking for an excuse, why? Because he wants to! He wants to, because his thinking is exuber-aberrantly tied to asian economic problems and asia IMF World bank bail outs, and Fed hikes, and US Treasury snaked rates on 30 Year US Bonds that follow or lead his lead (like lemmings off the cliff) is only a factored and premeditated vehicle to shift the valuation of world currencies and the arbitrage thereafter in favor of asia, and imports into the US which hurts the US economy and our next Internet E-Commerce revolution that is too alien to his outmoded way of thinking. The only encouraging "sound" amidst the noise out there, is that the economy, and in particular the Street (NYSE and NASDAQ too) have started to ignore his policy and way of thinking and have become slowly immune to his speeches, as statistic after statistic proves the US economy is robust, and there is no problem out there. None except Greenspan hightech/internet envy...envy at technology creating productivity rather than banking policy. We know the true power of this country and economy is in the heads of our talent, not in the paper banking system at the fed. Silicon chips not wood chips are the future. Of course Fed action in two weeks will still knock internets like AOL down 10 to 20% because of herd mentality and herd fears. You heard it here first. I am, Truly yours, -Crystal Ball I am, Truly yours, -Crystal Ball