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 : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (117538)	8/21/2001 10:09:31 AM
From: AC Flyer	Read Replies (3) \| Respond to of 436258

Michael: Your inaccurate post made post of the day. I guess it captures the spirit of the moment. Nevertheless, your post is long on opinions and short on facts. I feel like a party pooper for beginning with this, but what the hey! Your concluding statement - “In short he is fueling a credit crunch problem of humongous proportions.” - directly contradicts your criticism of the Fed Chairman’s actions to increase liquidity and cut the Fed Funds Rate. Credit crunches are caused by low liquidity and high interest rates. Now, to your question, “what pray tell has Greenspan done right?” 1) After just a few months on the job during the stock market crash of 19th October 1987, the Fed injected a huge amount of liquidity into the financial system so that banks and brokers were able to meet their obligations. Greenspan issued the following public statement: "The Federal Reserve, consistent with its responsibilities as the nation's central bank, affirms its readiness to serve as a source of liquidity to support the economic and financial system." The ’87 crash was not followed by an economic downturn. 2) Greenspan has used his power at the Fed to coerce successive administrations into reducing the federal deficit. During the credit crunch of 1989 to 1992, he stubbornly maintained high interest rates. He also repaired confidence in the banking system by tightening lending practices and raising capital-adequacy standards. His obduracy aroused the resentment of Treasury secretary Nicholas Brady, who argued that recovery was possible without inflation. Ignoring Brady's pleas for lower interest rates, Greenspan focused on the federal deficit and only started reducing rates after Bush, contrary to his election promises, agreed to raise taxes in October 1990. 3) In 1990 to 1991 he steadfastly refused to inflate the money supply to accommodate the temporary oil-price hike from the Persian Gulf war, thereby underscoring his commitment to price stability despite repeated carping from the Bush Administration. 4) In December 1992, Greenspan presented president-elect Clinton with his by now familiar argument that the federal deficit was the fundamental cause of high long-term interest rates: if the deficit were reduced, then rates would come down and the stock market would rise. Clinton and Greenspan struck a deal: the president would reduce the budget deficit and in return the Federal Reserve would keep interest rates low. 5) In January 1993, after the high-tax budget deal was completed - supposedly ensuring lower interest rates - Greenspan warned President Clinton and Treasury Secretary Robert Rubin that interest rates would have to rise to maintain price stability. Sure enough, Greenspan raised the overnight federal funds rate half a dozen times in 1994 in order to "pre-empt" inflation pressures. The economy slowed in 1995, but there was no contraction. 6) While Greenspan has adhered to.the so-called “price rule,” he has also remained aware of the risks that excess credit can present, even during a period of stable prices. In 1999 and 2000, his concern with the growth in consumer spending despite an apparently benign CPI, led him to enact a series of increases in the Fed Funds Rate, which had the secondary effect of bursting the Nasdaq bubble – too bad. (According to this rule, inflation is defined as too much money chasing too few goods. Hence, match monetary growth with output and this will stabilize prices and thus the economy). 7) In 2001, recognizing the risks to the real economy, Greenspan has decisively implemented a series of rate cuts. As usual, the Fed Chairman’s policy actions have closely followed the bond market. Michael, Alan Greenspan has made no secret of the fact that his priorities are controlling inflation and reducing budget deficits. He has never stated that the Fed exists to protect starry-eyed dot com and tech investors. A great deal of PAPER wealth has vaporized in the last two years, but you need to look further than our excellent Fed Chairman to find who is responsible. The mirror is a good place to start.

To: mishedlo who wrote (117538)	8/21/2001 12:49:48 PM
From: Jim Willie CB	Respond to of 436258

MishMan, dont forget GreenBald's quiet blunder in 1997 in the spring he wanted a "pre-emptive hike in rates" he was all a tizzy about irrational exuberance he feared inflation might arrive with renewed growth more like... feeling he missed out on his bond investments (only case of fed official NOT having blind trusts) well, his pre-emptive rate hike may have triggered the Asian Meltdown I have maintained this for four years US rates rise needlessly and irresponsibly then weaker Asian currencies weaken badly then all of Asia is in turmoil he disrupted the equilibrium, a delicate balance the blunders at the Federal Reserve are the greatest secret in the financial world I find it laughably ironic that GreenSnot is given great credit for the years 1994-1999 when he "allowed" growth to occur for God's sake, his brilliance happened when he relied upon the bond market's free equilibrium the bond market did not fear inflation in fact, it offered evidence of upcoming deflation the genius is not in GreenEye's mind it is in the free enterprise system, totally overridden by a bunch of septuagenarians who never ran a business I call the Federal Reserve our American version of the Communist Politburo they pre-empt free markets they tinker using heretical principles they have disdain for prosperity they cause their own "Fed Cycles" from serious errors in summer 2000, the Federal Reserve allowed for four months an INVERTED YIELD CURVE this destroyed economic growth, plain & simple as long as the Fed fights a mindless battle against a ghost of inflation, we are gonna see round after round of DEFLATION and the ravages that deflation causes books will be written about Federal Reserve blunders heck, Prez Monroe was scared to death after he created it he foresaw great danger in any institution attempting to control a free market / jim