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

To: Don Lloyd who wrote (57521)	4/27/1999 9:36:00 AM
From: Freedom Fighter	Read Replies (1) \| Respond to of 132070

Don, >>I question how you can reconcile your opinion of AG with the clear (to me) indication that he is almost certain to be the most Austrian economist to ever serve in the Federal Government. << I am not an expert on these matters either and I agree with everything you said in your post. I ask myself the same question you posed all the time. My criticism of him is this. Despite growing evidence of stock market excess and possible dangerous levels of credit he did nothing along the way except accommodate when they bubble almost burst. There were a number of opportunities along the way where he could have tightened credit to prevent this situation. In fact, many non-Austruian economists called for that at various points. It was even discussed at length at various times in "The Economist", G7 meetings etc... There are lots of economists that reject many of the Austrian ideas about how excesses form. So I would not consider a Fed chief like that to be irresponsible. I would just disagree with his/her policies. I agree with you that AG seems to readily accept many of the Austrian ideas. He's written about them in the past and made reference to them in recent speeches. So what's up? I'm not a mind reader but this may be what's going on his head. 1. He believes he is operating within the limited mandate of the Fed of stable consumer prices and sustaining economic growth. He thinks the market is an enormous bubble but it's not his job to make those decisions and/or burst it. (I am assuming that he thinks it is a bubble based on many comments he has made.) 2. He knows he made some monetary errors along the way, but he was then faced with global conditions that tied his hands. 3. He gave in to political pressures. 4. Not everyone at the Fed agrees with him that we have a bubble. 5. All of the above. I have one comment on real rates. Real rates may be high but that does not mean that money is not easy. I "suspect" our real rates are high in part because we have such a low savings rate, we are an enormous debtor country, and we have a huge current account deficit. My general view is that the stock market boom is as much a monetary phenomenon as it is greed, public participation etc... I also think the Fed has reinforced public beliefs about its ability to support the market. That makes it the responsibility of the Fed. WC