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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Ali Chen who wrote (17338)	2/15/2004 3:27:37 AM
From: Elroy Jetson	Read Replies (2) \| Respond to of 306849

I think what you describe as your humble theories are actually a very succinct exposition of the cautious incremental policy movements of Alan Greenspan, and the reason for them. The Fed is trying to "feel their way" along demand curves they can't be certain of without divine intervention. They know where they want to go but the can't certain what to do to get there, so they try a little bit of many things and go with what seems to work. What would be really disastrous is to have a "true believer" as Fed Chairman. Someone like Ben Bernanke who has no sense of humility or self-doubt and a bagful of of theories not grounded in reality which can guide and inform every one of his disastrous actions. Schumpeter would argue that all of these policy actions, whether gradual or bold, are counter-productive. But this is because he believed the market was self-correcting. As you note, this view is hardly popular today. Everyone from Milton Friedman to pretend economists like Art Laffer follow their Marxist-Leninist beliefs that capitalism requires constant policy intervention to remain stable. We can be grateful that Greenspan's gradual policy actions are less dangerous because they give the market a chance to adjust to his mis-allocations.