To: Little Joe who wrote (1458 ) 4/24/1998 2:32:00 AM From: ahhaha Read Replies (1) | Respond to
No question about the truth you've expressed. Geenspan has in the past stated how much he was worried about "irrational exuberance" in stock prices. That was when the DOW was at 6000. Not only stock prices which are financial abstractions, but also real economy is effected by higher interest rates. Because we are still in intrinsic deflation and will be until the 22nd century, incremental tightening has far greater long term deflationary effects. It is very difficult to assess the lagged degree of deflation following a tightening as Alice Rivlin pointed out yesterday. Inevitably the FED will take it slowly because this is the only rational course. Of course, this is the lesson learned from the last ten years, but a sea change has taken place that will cause this cautionary stance to be in error. The error is in underestimating how smart or clever the rest of the world has become in assessing the worth of their labor. The internet is chiefly responsible for the dissemination of this recognition and rising worldwide prosperity has given it momentum. The dissemination has essentially taken place in two years.
