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Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: Secret_Agent_Man who wrote (235206)	4/12/2003 6:41:44 PM
From: NOW	Read Replies (1) \| Respond to of 436258

Clownboy claims Japanese deflation a result of prudent economic policy "replicating ...environments under a gold standard" Chairman Greenspan: “As I have said publicly, the odds of that happening we perceive as to be quite small. But as I said to a colleague the other day, we spend a very small fraction of our time at the Federal Reserve and at the Federal Open Market Committee in actually being engaged in operational monetary policy. The rest of our time we ask ourselves every sort of question of what could go wrong and how would we respond to that event if it happened. And needless to say, the experience that the Japanese have exhibited to the rest of the world has not only gotten our attention but every central banker’s attention, largely because [all] of us presumed that a fiat currency - which of course is one not backed by gold or some other commodity or physical wealth - is prone to excess and inflation. And, indeed, the evidence subsequent to the 1930s into the 1950s was clear evidence of that fact. What we have learned is that indeed prudent policies can replicate the type of environments that are created under a gold standard or under a commodity standard, and therefore, you can have deflation as we had in the nineteenth century for example. And indeed, the Japanese demonstrated that it’s possible and there are other countries who are having similar characteristics. So we have examined what type of policies we at the Federal Reserve would engage in were that low probability event to emerge. And we’ve been looking at a number of different operational procedures which I and my colleagues have been discussing on and off in public recently. And we will continue to evaluate all the various different types of procedures… In summary, it’s not one of the things that we are very much concerned about happening. But should it happen, I trust we will be fully prepared from the central bank’s point of view to address it the best way we know how.”