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To: Skeeter Bug who wrote (139992)	2/28/2002 12:51:02 AM
From: H James Morris	Read Replies (1) \| Respond to of 164684

SB, this is what I read. >>Alan Greenspan, the chairman of the US central bank, has said that there are signs of recovery in the US economy, but it would be too early to say how strong it was going to be. Mr Greenspan said that "increasing signs have emerged that some of the forces that have been restraining the economy over the past year are starting to diminish." Even a subdued recovery beginning soon would constitute a truly remarkable performance for the American economy in the face of so severe a decline in equity values and an unprecedented blow from terrorists. Alan Greenspan, US Federal Reserve But he warned that "an array of influences unique to this business cycle, however, seems likely to moderate the speed of the anticipated recovery." However, he said that the economic stimulus package that is now stalled in Congress is "probably not necessary" although it could have proved a useful "insurance policy" if the recovery does not materialise. Restrained consumers Mr Greenspan said that there were "cross currents" that could "dampen" the outlook for household spending, notably the burden of debt held by consumers, rising unemployment, and (for the better-off) the drop in the value of their stock investments. Mr Greenspan, who was giving his semi-annual testimony to the US Congress on the state of the economy, was guarded on the question of whether the Fed would begin to raise rates again. In the past year, the Fed has cut interest rates 11 times to 1.75% in attempt to jump-start the economy before pausing in January. Economists said that Mr Greenspan's remarks signalled that he would keep rates unchanged. "The Fed will probably hold rates steady at a low level as long as they can. And I think as long as the unemployment rate is rising, they'll maintain a policy bias toward weakness," said Gary Thayer, chief economist at A.G. Edwards & Sons Mixed signals Meanwhile, there have been some signs that the US economy is bottoming out after the recession which academics say began in March. The problems of Enron are readily traceable to an old fashioned excess of debt Alan Greenspan, US Federal Reserve Factory orders have begun to pick up as inventories are liquidated, and durable goods orders have been strong. But new home sales fell sharply in January despite the lower interest rates. And consumer confidence fell unexpectedly this week, industrial output is still falling - and unemployment is rising. The dollar has been strengthening on international currency markets, and the US stock market has been rising recently, on the hope of a US recovery Company spending the key Mr Greenspan pointed out that the current recession was caused by "sharp cutbacks" in capital spending by companies, which "interacted with and were reinforced by falling profits and equity prices." And he said that any recovery in business capital spending was likely to be gradual. He warned that of the "Enron effect" which could make other "new economy" companies more susceptible to contagion. He said that "trust and reputation" can vanish overnight for a company like Enron whose value "largely rests on capitalised reputation." But he defended the general use of swaps, derivatives and other financial instruments which he argued had helped stabilise the market and prevent the recession from becoming worse. Questions over Enron Many of the questions by the Congressman centred on the lessons of the Enron debacle. Mr Greenspan was critical of the growth of stock options, and said that the interests of the shareholders and the chief executives of companies needed to be more closely aligned. And he said that the fundamental problems of Enron were "readily traceable to an old fashioned excess of debt, however acquired, as well as to opaque accounting and lax counterparty scrutiny." But Mr Greenspan did not believe there was a systemic risk arising from Enron, and he was generally optimistic about the "recuperative powers of the US economy" which he said "had been remarkable." news.bbc.co.uk

To: Skeeter Bug who wrote (139992)	2/28/2002 7:03:25 AM
From: Oeconomicus	Read Replies (4) \| Respond to of 164684

proof of greenspan's complicity in creating the biggest bubble in history... also proof that alan is intellectually dishonest and will change his view when convenient. Proof? Of that? No. What I see looks more like intellectual dishonesty on the part of the writer - that good ol' oxymoron "journalistic integrity." The quotes he pulls from the Sept '96 FOMC transcript are taken way out of context. AG's quote, as used, seems to imply that he agreed there was actually a financial bubble in the US markets in Sept '96. Well, that's not what he said. If you read the actual transcript, you will find that he was commenting on potential danger and potential actions in dealing with a bubble, should there be a bubble. His comment was in reference to Lindsey's expressed concerns that conditions were developing that could lead to a financial bubble, particularly excessive optimism about corporate profits. Lindsey also commented on the psychology of it, likening it to a "gambler's curse" where a string of good luck makes the gambler even more optimistic about his luck continuing (see page 24, last paragraph), and worried that "our luck may be about to run out." What Roach conveniently leaves out of his "proof" is that, besides the dull reporting of economic statistics from the various FR banks and governors, the meeting is full of hypothetical discussions of scenarios that might develop from the trends that certain pieces of data might imply and the various possible ways that the Fed might best deal with those situations should they come to fruition. BTW, in the Spring of '96, there was a mini-bubble of sorts in the early internet stocks, but by the time of that meeting, it was pretty much deflated and it wasn't until late the following Summer, or perhaps the Fall, that a few inets were let out of the dog house. It wasn't until late '98 that it became clear to many people there really was a bubble, but they were few and were shouted down by the addicted gamblers who were insisting that it's better to let your money ride. "Look at the streak I'm on - why would I want to stop now? In fact, you should put some money down, too, 'cause those wining hands just keep on coming." I seem to recall arguing with them right here. Weren't you one of 'em? Bob PS: AG's a funny guy. Hell, he even opened the meeting with a setup for a punch line from the SF Fed Gov. You could almost hear the "ba-da-boom" when he landed it.