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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Earlie who wrote (48438)	2/23/1999 1:04:00 PM
From: accountclosed	Respond to of 132070

Keep up the good work. I think your "hang in there, go slow" stuff has been very good.

To: Earlie who wrote (48438)	2/23/1999 2:36:00 PM
From: Kailash	Read Replies (3) \| Respond to of 132070

Bad news: no way to tell irrational exuberance except afterwards! I think this is very funny - chairman Alan's Greenspeak trying not to rock the markets and at the same time get that Goldilocks descent. He now has the answer to the question of whether there is irrational exuberance (that's the good news; progress here) and it is that you can't really know except in retrospect (that's the bad news). It's like saying you can't know whether the airplane needed repairs until after the crash - but then even a very level-headed person can be pretty sure. SEN. BUNNING: ''In December 1996 with the Dow average at 6437 you were worried about what you called ''the irrational exuberance of the markets.'' With the Dow closing at 9552 (Monday), do you still have those same fears?'' GREENSPAN: "If you go back to the text of that 1996 speech, which was a very turgid speech that put an awful lot of people to sleep through most of it, what I was trying to raise was that I was concerned that the discussions with respect to the various elements of how one should do monetary policy, whether we should begin to start to look at the issue of not only the price of goods and services but also the price of assets as well. "I raised the issues of what had been effectively a bubble in Japan in (the) 1980s into 1990 and other previous periods where it was very difficult to know if you had a bubble or whether or not you had some real underlying force in the marketplace. And the question I was asking abstractly was how will we know when markets are gripped by 'irrational exuberance'. And I didn't have an answer at that particular point. "I think I have an answer now, in that it's very difficult to judge, except in retrospect. If any stock market ... falls by 30 or 40 percent in a matter of weeks or a very few months I will grant that there was a bubble back there. The issue of trying to identify a bubble in advance means you have to be confident enough to predict a decline of that order of magnitude, and I don't know anyone who knows how to do that. ''So we are at this stage caught in an issue where in the broadly changing economy that I've been discussing, we are seeing different things that are going on. Clearly no one has questioned at all that the dramatic acceleration we've seen in some technologies, and the marked increase in productivity and profitability of American business, has undoubtedly had a significant impact on underlying prices of all capital assets, including equities. Whether or not it's gripped by irrational exuberance is an issue that you won't really know for sure, except after the fact. But as I indicate in my prepared remarks, that I suspect that these markets are highly valued, leaves me without terribly much doubt at this point.''