Friday, September 07, 2007


Greenspan's lying, again

When I read this I would have blown whatever I was drinking through my nose if I had been in fact drinking something. The chutzpah of Alan Greenspan is breathtaking.

Bubbles can't be defused through incremental adjustments in interest rates, he suggested, the paper reported. The Fed doubled interest rates in 1994-95, and "stopped the nascent stock-market boom," but when stopped, stocks took off again. "We tried to do it again in 1997," when the Fed raised rates a quarter of a percentage point, and "the same phenomenon occurred."

Whaaa..??? Doesn't he remember when he said the words irrational exuberance in December 1996. I remember it very well as I was trading night hours and his comments hit the after hours market hard enough that the S&P 500 futures were limit down for most of the night. But what Greenspan did after that was most telling. He never said those words again instead embracing the bubble attributing the stock markets gains to improvements in productivity. He never used his most powerful weapon as Chairman of the Federal Reserve, the bully pulpit.

To say now that he was concerned about the bubble considering how fast he backed off the irrational exuberance speech is laughable.

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