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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (23088)	8/31/2002 1:41:33 AM
From: elmatador	Respond to of 74559

Greenspan goes defensive. Greenspan defends record over market failings By Gerard Baker in Jackson Hole, Wyoming Published: August 30 2002 16:01 \| Last Updated: August 30 2002 16:01 Alan Greenspan, the chairman of the Federal Reserve, staunchly defended himself on Friday against criticism that he should have done more to prevent the stock market bubble of the 1990s. <<He is getting more and more defensive!>> The chairman of the central bank said suggestions that he should have raised interest rates to deflate rising stock prices were misplaced. "The notion that a well-timed incremental tightening could have been calibrated to prevent the late 1990s bubble is almost surely an illusion," he told a symposium of the Federal Reserve Bank of Kansas City in Jackson Hole. <<Liquidity injection, pre-Y2K, which was a marketing gimmick to seel stuu, was a bad move, a very bad move. It was the straw that crushed the camel's back>> US stock price indices are more than 25 per cent below their peak and the country's economy is still suffering the effects of the collapse of the 1990s bubble. The US Commerce Department released figures on Friday showing that while consumer spending jumped last month, personal income failed to grow for the first time since the aftermath of September 11 and for only the ninth time in a decade, fanning fears of a double-dip recession. Mr Greenspan became associated with optimism about US performance in the late 1990s, often expressing confidence that rising productivity growth had lifted the economy on to a path of stronger growth. On Friday he repeated his belief that accelerated productivity growth had lifted the profitability of US companies. In defending his record, Mr Greenspan instanced previous periods of sharp interest-rate increases - in 1988-89 and 1994-95 - that had failed to stop equity prices rising. The experience suggested it was impossible to burst a bubble without inducing a recession - "the very outcome we would be seeking to avoid". The Fed chairman said other measures to restrain investor enthusiasm, such as tougher margin requirements or official warnings, would not have worked; in any case it was not possible for policymakers to say with certainty when asset prices had reached unsustainable levels. "As events evolved, we recognised that, despite our deep suspicions, it was very difficult to definitively identify a bubble until after the fact." Additional reporting by Peronet Despeignes in Washington