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To: orkrious who wrote (203646)	11/8/2002 10:16:12 PM
From: orkrious	Read Replies (1) \| Respond to of 436258

this is so classic Recent “debate” is increasingly reminiscent of the late 1920s and early 1930s, to the point of being eerie. Regrettably, the earlier wrangling about prices, markets, and monetary management was anything but satisfactorily resolved. In the end, the Monetarists won and history (and curriculums) was revised to blame the Depression on a shortage of money and liquidity. They got it absolutely wrong. Amazingly, virtually no one is today willing to admit that Federal Reserve policy has been an unmitigated disaster, with the meter still running (time and a half for overtime!). What we have today is so far removed from sound money, with the lunatics directing the governors of the asylum to pump in only stronger laughing gas. There is today an overwhelming consensus that there are no costs associated with Fed rate cuts, thus every reason to aggressively cut to the bare bones and quickly. While our central bankers were determined to avoid learning lessons from the Japanese Bubble experience, they do appreciate that it is expedient to “learn” from their dismal post-Bubble struggle – the key is to move early and move aggressively. But the Fed is only feeding the gluttonous financial sphere to death. The big problem we have with all of this is that our analysis convinces us that this is precisely the recipe that led to a hopelessly deranged financial sphere that was resolved with the 1930s financial collapse and Depression. It is my view that the post 9/11 aggressive rate cuts (and consequent blow-off in mortgage finance and Credit market speculative excess) were an even greater mistake than the post-Russia/LTCM cuts and “reliquefication” that fueled the fateful technology/stock market speculative blow-off. And, amazingly, no one will step up and admit we have set course for financial disaster. Sure, ultra-easy money stimulated unprecedented household borrowings, with a spike in home and auto sales. We will now pay the price for artificially inflating housing and auto demand. It was absolutely irresponsible monetary policy to actively stimulate consumer over-borrowing and spending in this manner – a desperate attempt to Sustain Unsustainable boom-time demand. It’s been little more than a dangerous monetary gamble with great risk and NO possibility for success. Financial system and economic stability would have been dramatically less disturbed by major (“Keynesian”) deficit spending. But policy chose instead to do what should have been avoided at all cost: Further stimulation of the disturbed financial sphere.