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To: FR1 who wrote (168549)	7/21/2002 2:20:22 AM
From: Ali Chen	Respond to of 186894

FR1, "If the clock ain’t broke - don't fix it." ,"why should we try to fix it?" I think that the analogy is wrong, that is why. First, clocks (or other mechanisms usually employed in this saying) are entities of sustained style of operations, where plus-minus adjustments do not mean catastrophic outcome. With the stock market, the better analogy would be a flywheel spinning out of control at ever increased rate, so at some point it is obvious that it will break down and ruin the whole house. I also think that "the popular theory" you mentioned may have some merits, just the interpretation of statistical data was incorrect, and maybe the exact "magic" numbers were misestimated. The problem I see is that those "skilled workers" the theory was so concerned about do not make up those 5% of the unemployment statistics. Another problem with "skilled worker" is the definition of "skilled". This is very fuzzy notion, and labor markets are very stretchable in re-defining it, just productivity suffers a bit, that's it. "So the answer to the question "What evidence do you have that leaving it alone would do less harm to the American society?" is that we don't know either way but what we do know is that it was a really big mess taking the path AG chose." Which means that we have learned something (I hope), that the simple supply of money is not very direct control parameter, it probably has many undesirable side effects. I still believe that without fine regulatory constraints our economy cannot be stable. The question is to find that optimum between stability and growth sustainability. - Ali

To: FR1 who wrote (168549)	7/21/2002 7:21:27 PM
From: BelowTheCrowd	Respond to of 186894

Yeah, but I think he shouldn't have intervened to create the bubble either. Make no mistake about it. Had he not pumped liquidity in order to battle the imagined catstrophes from Asia, Russia and LTCM. Had he left things alone, we most certainly would have seen some failures, maybe big ones. The alternative was to bail out everybody by inflating the equity market to the point of absurdity. He pumped the liquidity. He saved LTCM, and created a crisis of a different kind instead. When money's cheap, people spend it on stupid things, like dotcom stocks or 27 seperate broadband/long distance carriers. Greenspan made money cheap and built up an "economy" that was not sustaniable except in the absence of more and more cheaper and cheaper money. Should have let LTCM die and dealt with the consequences of it. We would have lost a couple of banks and other businesses, but probably suffered a much smaller loss overall than we have in the past two years. The stock market would have returned to a sane equalibrium much sooner than it will now. The question is not about what Greenspan did in 2000. It's about the sequence of ill-advised decisions he started making after 1996. Decisions that did nothing but excacerbate the problems, both moving up and moving down. mg