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To: michael97123 who wrote (47422)	1/29/2001 9:28:30 AM
From: Adam Nash	Read Replies (2) \| Respond to of 77400

The idea that Greenspan worries about recession first and inflation second is the exact opposite of his (publicly stated) intended policy. In fact, nominally, the goal of the Fed is monetary stability (read: no inflation).

To: michael97123 who wrote (47422)	1/29/2001 9:31:00 AM
From: GVTucker	Read Replies (1) \| Respond to of 77400

I think 3/4 of a point is a possibility also. If that happens, I would take that as a negative for our economy. A decline in rates that brisk (1¼% in less than a month) would sharply increase inflationary potential at a time when we least need it. If a recession is in the cards, rate cuts won't stop it. Rate cuts that are too aggressive will just increase the probability that the recession is accompanied by inflation.

To: michael97123 who wrote (47422)	1/29/2001 9:54:28 AM
From: John Dunigan	Read Replies (1) \| Respond to of 77400

Finally someone who thinks as I do that the FED will do whatever it takes to prevent a recession and that could include a 3/4 point rate cut. The key to this countries economy is consumer confidence, and the state of the equity markets has a great deal to do with them. So all of this talk about only a 1/4 point cut is nonsense after listening to Mr. Greenspans comments last week an the language that came out on 3 Jan. This won't last long John

To: michael97123 who wrote (47422)	1/29/2001 7:51:33 PM
From: ig	Read Replies (2) \| Respond to of 77400

"I think he will do almost anything to prevent an official recession on his watch. He can always deal with inflationary pressures later. He listened to the inflation hawks before and helped kill the economy to stave off the possibility of 3% inflation. He has a legacy too and it is anti recessionary first." Where on Earth did you get THAT idea?? It sounds like you are saying what YOU would do if YOU were Fed boss, but it has NOTHING to do with what Greenspan thinks. Greenspan is likely willing to endure a brief and shallow recession to avoid inflation, if his past statements are any indication. Toward the end of 1990, as the economy was sliding into recession, Greenspan said, "But recessions always end." He has always felt that way. The last thing he wants is to have to do what Volcker did to snuff inflation during the 70s -- and not least of all because such actions result in recession! (As we saw in the early 1980s.) "Deal with inflationary pressure later," you say? Greenspan is and has always been terrified of even a little inflation, because he believes it is an insidious thing that is very hard to stop once it gets started. He is not sweating a transitory recession. He is more concerned about the possibility of leaving a legacy of incipient inflation than he is about the possibility of leaving a little two-month blip of a recession. But what about the prospect of a larger and more devastating recession, I hear you saying? Runaway inflation is a thing of the past and he needs to be more on guard against a deep and destructive recession, you claim? "I find it amusing that the younger generation finds inflation the number 1 enemy and the surplus the number 1 good. I believe younger folks should take a look at the real catastrophe which is depression and severe recesssion. Thats where people suffer. [...] You obviously dont have a sense of history when it comes to what happens when the the economy is falling. I am not saying inflation is a good thing but we are not talking about the runaway variety here. The danger is an economy that is fallling out of bed because of the feds overshooting rate increases last year." Greenspan saw his predecessor jack rates up to 19 percent before inflation was finally brought under control, but the price of damping that inflation was -- you guessed it -- a long recession. Doesn't that tell you something about why Greenspan has always feared inflation more than recession? Maybe he's changing his mind about inflation. God knows there are many good economists out there who do not share Greenspan's mortal fear of recession-causing inflation. (It is recession-causing because of the rate-tightening steps needed to stamp it out.) Greenspan has been showing indications that he has become more concerned with the health of the stock market; that he is beginning to view the health of the stock market as an essential indicator of the health of our consumer-driven economy. Could that mean a 3/4-point cut is in the offing? Yes, it surely could; but whatever Greenspan may come to believe in the future, let's be clear about what he has believed in the past. In summary: 1. He has believed that inflation is an insidious thing that grows very quickly once it gets over a certain threshold, and that it needs to be vigorously controlled to prevent it from snowballing. 2. He has believed, with very good reason, that if inflation is allowed to slip over that threshold, the steps necessary to rein it in after it begins to metastasize will bring about serious recession. In other words, in Greenspan's mind, growing inflation is a precursor -- NOT an alternative -- to recession. Letting inflation grow in order to preempt recession actually risks making an exacerbated recession inevitable. 3. He may be changing his mind, but we'll just have to see. ig