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

To: Freedom Fighter who wrote (58826)	5/7/1999 6:06:00 PM
From: bill meehan	Read Replies (1) \| Respond to of 132070

Symbol(s) G/FED & Date Use Page Up, Page Down, +, -, or press Ù -------------------------------------------------------------------------------- 05/06 12:28P (DJ) Former Fed Governor Lindsey Warns Stocks Bubble Will Burst Story 4968 (G/FED, N/DJN, N/DJWI, N/CBK, N/CEN, N/STK, R/NME, R/US) WASHINGTON (Dow Jones)--Former Federal Reserve Governor Lawrence Lindsey said Thursday the recent surge in U.S. stock prices is an unsustainable "bubble" that has been inflated by overly-loose monetary policy. During a panel discussion at Johns Hopkins University's Paul H. Nitze School of Advanced International Studies, Lindsey said "we have a bubble" in stock prices and that "the bubble will burst." He said much of the demand for stocks has been encouraged by monetary policy that is "too loose" and fiscal policy that has been "too tight." This has led to a sharp decline in household savings as low interest rates encouraged borrowing for investment. Lindsey said that "certainly rates will have to rise" at some point in the future and the "bubble will burst" when this time arrives. He admitted he switched his investment to cash from equities when the Dow Jones Industrial Average passed through 8500 points, some 3400 points below the New York Stock Exchange's current level. "We know the bubble is related to monetary conditions," Lindsey said of current stock prices. "I'd rather have a tighter monetary policy and a looser fiscal policy" to take some steam out of the market. As conditions stand, a deep correction in U.S. stock prices could have a devastating impact on world markets and the global economy and the U.S. should Symbol(s) G/FED & Date Use Page Up, Page Down, +, -, or press Ù -------------------------------------------------------------------------------- 05/06 12:28P (DJ) Former Fed Governor Lindsey Warns Stocks Bubble Will Burst ensure that it isn't left to the Fed alone to bear the weight of trying to offset this damage by cutting rates. Lindsey currently holds the Arthur F. Burns chair at the American Enterprise Institute and also is an economic adviser to George W. Bush, the Texas governor aiming to be the Republican Party's nominee for the 2000 presidential elections. -By Damian Milverton, +202-862-9272; damian.milverton@dowjones.com (END) DOW JONES NEWS 05-06-99 12:28 PM