Jay, I read all that, and J K Galbraith's stuff. It convinces me yet again that the critics have less understanding than our great and wonderful idol. That article was at least literate, didn't use maniacal language and had sentence structure and superficial logic.
But the underlying idea is still that human investors are mindless zombies who didn't know there was a bubble, couldn't do anything about it, were conned by Uncle Al and it was all the fault of somebody else. We are all serfs to the creator and maintainer of the means of exchange. We didn't have the capacity to say to ourselves "Whoa! What a bubble that looks like to me! I think I'll sell my shares and I definitely will NOT be borrowing Uncle Al's money to buy more, even if he charges me only 1% interest." Which he didn't - he raised interest rates while everyone squealed like little piggies.
Did these now-whining little piggies say to themselves, "I am in a trance, I cannot see as far as a bottom line, I must buy more stocks because my brain has been disconnected from everything else and I am helpless before the Big Bubble. I wish to flee, to sell, to cancel my loans, to reduce my debt but I am powerless before the Big Bubble. My legs are as in a dream, I try to run, but they won't move and only excruciatingly slowly can I drag one forward, then the other while my doom approaches in a bottomless pit of nameless dread."
Maybe they are all useful idiots, whose existence is to mindlessly feed the monetary machine. Zombie mantra chanters, "Oh Big Bubble, I see you for what you are but I cannot help myself but buy more stocks and borrow money to do it, taking a mortgage on my house if necessary to raise cash. I know Uncle Al is printing printing printing, but I must borrow, borrow, borrow. I must not control myself. The state must tell me what to do. They must take away the punch bowl because I'm a halfwit who can't control myself even though I know that there is a huge bubble blowing up which will burst."
Then, when it does, they deny culpability and any responsibility for their own wacko decisions.
<...Mr. Greenspan's sins in this regard are both of commission and omission. An eternally accommodating monetary policy provided an inexhaustible supply of the noxious gas critical to the bubble's expansion. The Fed wasn't just relaxed through the better part of the 'Nineties; it was out to lunch.>
Now, how stupid is that? It wasn't an eternally accommodating monetary policy. Interest rates were raised and raised until people were whining louder than a fleet of Koreans about CDMA royalties. To call US$ a noxious gas is silly. US$ was not inflationary, so they might as well print heaps [and anyway, it wasn't especially large amounts they were printing].
<Moreover, by giving his benediction and therefore lending credence to the myth of the New Economy and its boon companion -- the productivity miracle -- he sanctioned the false rationale used to justify the bubble. By denying the existence of a bubble, he provided emotional and psychological cover for the multitudes swept up in the speculative frenzy.>
There was and still is a new economy. It's global, it's software, photon and ASIC driven with content and communication as the underpinnings and It's just getting warmed up. There was and is a productivity miracle. Despite much printing of money, inflation remains near zero. He didn't deny the existence of a bubble, he worried about irrational exuberance way back in 1996. He couldn't have stopped the absurd speculative frenzy in dot.com mania, which was a function of individual frenzy, unrelated to debt - a bidding war requires zero debt to raise the price and make people start spending their capital as though it was revenue.
<And by refusing to recognize a bubble or the glaring evidences of an outbreak of infectious greed, he, of course, let himself off the hook of having to do something about them. He contented himself pretty much with one milquetoast warning -- formulated as a question rather than a declaration -- of irrational exuberance, and then resolutely did nothing, except to spike the punch at the party.>
He maintained a solid currency, which is still solid, despite the biggest bubble burst in history and the turbulence of a global economy. It is still solid. The economy underpinning the currency is still solid, even though there has been a very large scale market clearing process underway, with more to go. Uncle Al has navigated various potential disasters over the last decade and is still doing so. Two years into the latest crunch, things are going amazingly well.
<We're not engaging in ex post facto rebuke here. Many a time and oft, as the mania waxed ever more maniacal, we urged Mr. Greenspan to dust off a venerable monetary weapon that in the past had proved quite effective in deflating puffed-up stock markets without inflicting injury on the rest of the economy: a boost in margin requirements. Nor were we alone -- but Mr. Greenspan shrugged off the suggestion by alluding with proper gravity to "studies," never documented, that supposedly demonstrated the futility of margin changes.>
I bought Globalstar shares on minimal margin, thereby holding the price up. Many others did the same. I could have bid the price up with NO margin simply by selling one stock and bidding up another. That is such a simple concept that it's amazing people don't understand that rising prices require NO debt. People simply offer a higher and higher price for fewer and fewer shares. Up goes the price. One share could change hands back and forth and the price could rise as high as the bidders like. It's very simple. NO debt is required.
<Meanwhile, Mr. G continues to sing the solemn praises of the new productivity as the elixir for whatever ails the economy and, implicitly, for what's killing the stock market. However touching, such faith, sad to report, is misplaced. As the accompanying chart shows, the only thing relatively new about productivity is Mr. Greenspan's passion for it, and even that's growing a bit long in the tooth.>
The productivity enabled by zero mass, zero marginal cost software and near-zero marginal cost for most other stuff these days, is a huge boost, but with competition, it ends up in customer benefits rather than profit on the bottom line unless there is a relative lack of alternatives for customers to use. One person can do a LOT - an army of clerks with pen and paper used to be needed to do calculations. Now one person with a computer can click 'refresh' and the whole spreadsheet or whatever is redone instantly.
<The chart is the handiwork of MacroMavens' Stephanie Pomboy, whose commentary on the big economic picture we find great fun to read as well as invariably informative. We first ran the chart on May 27 because it so graphically illustrates that, as Stephanie puts it, the recent gains in productivity are anything but miraculous; instead, they're both ordinary and cyclical. Mr. G's misguided obsession, voiced prominently in his spiel to the solons, prompted us to run it again.... >
The productivity gains are not cyclical. They are miraculous. The cynicism and jaundiced view of life, which suggests that what happened over the past 5, 10 and 20 years was cyclical and ordinary, shows the lack of understanding of what's happening. The electricity revolution of the early 20th century and the industrial revolution of the 19th century were trivial compared with what's happening now. The productivity and more importantly the quality of life improvements [often with little profit] of the past 20 years have been amazing and could reasonably be called miraculous [if we didn't know they were created from the brainpower of ordinary blokes, who get flatulence and get in trouble from their wives - note that very few of the amazing developments were created by women, despite the great and wondrous claims of female equality - hmmm, I will ask Google for inventions by people without a Y chromosome].
Articles like that don't persuade me that they have a clue what's going on or that Uncle Al isn't directly descended from some supernatural being. In fact, I can feel a new religion coming on! Worshipping Uncle Al and the dollar seems as good as Mohammed and Allah [peace be upon them, but Tomahawks be upon their Matrix of Malevolence disciples, which seems likely to happen sooner rather than later] or the Crazy Christians like the IRA who belatedly have figured out [they claim] that it wasn't all that good to be bombing children and other innocent parties in their absurd campaign for 'freedom'.
Praise be to Uncle Al and Pieces [of Eight?] be upon him, the Great Profit.
Mqurice |
