Alan Greenspan what have you done - 500 Beiträge pro Seite

[Dritte Million]

23.2.00
Watching the Q&A with Chairman Al at the Senate Banking Committee live on CNBC. A remarkable thing is happening. The senators are asking Greenspan really tough questions! And they`ve got him on the run-- his answers to their questions aren`t his usual magesterial gobbledygook: it`s incomprehensible, nervous rambling.

One Senator asked him point blank why he`s trying to slow down the economy when there`s no evidence of inflation anywhere, only Greenspan`s personal "wealth effect" theory. Is that theory worth throwing people out of work, people who have finally been able to get a job thanks to the rapidly growing economy?

Greenspan answered that he`s not trying to slow the economy, but rather to keep it expanding. Good "key messages" answer: he`s well trained. But he knows it`s not true, and he couldn`t keep himself from rambling on and revealing himself. The highlight was a tortured analogy about how the economy is like a boat heading into dock, and we have to keep it from crashing into the dock, so we have to -- and then he stopped, realizing that he was about to say "slow down the boat" -- then he tried to recover by talking about turning the boat. But the senators knew what he almost said.

Further questions, framed aggressively, demanded to know why Greenspan believed the economy couldn`t grow at 4-5%. Another concluded with an admonition not to cause a recession "on my watch."

The format of this Q&A doesn`t permit extensive back-and-forth, nor any particular resolution. So Greenspan gets to say his piece, and get the last word.

But I think there`s a real tone change in this. We can build on it. Maybe the tide of public opinion is finally turning.

But that`s not necessarily bullish. Greenspan fancies himself a MOTU (master of the universe), and if he sees his power being questioned or threatened he`ll use it all the more. Stay tuned.

[GlobalInvest]

NEW YORK (Reuters) - U.S. blue-chip stocks cut early losses and technology shares jumped to session highs at
midday on Wednesday after Federal Reserve Chairman Alan Greenspan said monetary policy was not specifically
aimed at keeping stock prices in check.

[...]

``We are not focusing monetary policy on the stock market,`` Greenspan said. ``To the extent that it affects the
economy we respond to that, but ... we don`t look at stock prices and say `They`re rising, we have to raise interest
rates,``` he said.


yahoo, http://dailynews.yahoo.com/h/nm/20000223/bs/stocks_leadall_2…



Looks not so bad....

Thomas

[Dritte Million]

- We are not focusing monetary policy on the stock market
- we don`t look at stock prices and say "They`re rising, we have to raise interest rates"

Gotcha Alan

Nasdaq new ATH + 3.8 % oder 168 Punkte

[Dritte Million]

Here is the record of Dr. Greenspan`s warnings on the stock market, in his own manner and style, along with their revisions and the contemporaneous levels of the Dow and Nasdaq.



Dec. 5, 1996: Speech on "The Challenge of Central Banking in a Democratic Society," presented at an awards dinner sponsored by The American Enterprise Institute for Public Policy Research.
DJIA: 6437; Nasdaq: 1300.

And how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?


Feb. 26, 1997: Humphrey-Hawkins testimony to the Senate Banking Committee.
DJIA: 6983; Nasdaq: 1340.

As you know, last December I put the question this way: "How do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions...?" We have not been able, as yet, to provide a satisfying answer to this question, but there are reasons in the current environment to keep this question on the table. Clearly, when people are exposed to long periods of relative economic tranquility, they seem inevitably prone to complacency about the future. ... History counsels caution. Such caution seems especially warranted with regard to the sharp rise in equity prices during the past two years. These gains have obviously raised questions of sustainability.


July 21, 1998: Humphrey Hawkins testimony to the House Banking Committee, Q&A.
DJIA: 9190; Nasdaq: 1979.

A significant part of the rise in equity prices has resulted from a continuous increase in long-term expected earnings, starting from evaluations of security analysts in early 1995, virtually continuously since. They have raised their long-term expectations virtually month after month and their current level, which is well over 13 percent annual rate, if projected indefinitely in the future, projects a very marked rise in profit margins and the share of profits in the national income. History tells us that that is going to run into some difficulty sooner rather than later, which suggests that these three-to-five-year projections of analysts are unrealistic and that the real world will somehow converge and suggest that to them in no uncertain terms.


Feb. 23, 1999: Humphrey-Hawkins testimony to the Senate Banking Committee, Q&A.
DJIA: 9366; Nasdaq: 2376.

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 indicated in my prepared remarks, that I suspect that these markets are highly valued leaves me without terribly much doubt at this point.


May 6, 1999: Speech at 35th Annual Conference on Bank Structure and Competition of the Federal Reserve Bank of Chicago.
DJIA: 10,946; Nasdaq: 2472.

The breadth of technological advance and its application has engendered a major upward revaluation of business assets, both real and intangible. That revaluation has induced a spectacular rise in equity prices that to many has reached well beyond the justifiable.


June 17, 1999 Speech to Congress` Joint Economic Committee .
DJIA: 10,841; Nasdaq: 2544.

A benign economic environment can induce investors to take on more risk and drive asset prices to unsustainable levels. ... The 1990s have witnessed one of the great bull stock markets in American history. Whether that means an unstable bubble has developed in its wake is difficult to assess. A large number of analysts have judged the level of equity prices to be excessive, even taking into account the rise in "fair value" resulting from the acceleration of productivity and the associated long-term corporate earnings outlook.


July 22, 1999: Humphrey-Hawkins testimony to the House Banking Committee, Q&A.
DJIA: 10,969; Nasdaq: 2684.

A significant part of the rise in prices reflects rising expected earnings, and a goodly part of that is a very major change in the view of where productivity is going. What we do not know is whether it`s being overdone or to what extent it`s being overdone. I`ve always said I suspect it is, but firm, hard evidence in this area is very difficult to come by.


Feb. 17, 2000 Humphrey-Hawkins testimony to the House Banking Committee.
DJIA: 10,514; Nasdaq: 4548
These safety valves that have been supplying goods and services to meet the recent increments to purchasing power largely generated by capital gains cannot be expected to absorb an excess of demand over supply indefinitely.

[Dritte Million]

.
Greenspan has two instruments of power.

One is the Fed`s open market desk which can raise rates by selling bonds from its portfolio.

The second is his mouth, which can raise rates by getting other investors to sell bonds from their portfolios.

Either way it`s real. Bonds are sold.

[Dritte Million]