Al the Bubblemeister

Enrique Diaz-Alvarez enrique at
Wed Dec 16 11:42:09 PST 1998

Brad De Long wrote:

> >Doug
> This is why Alan Greenspan is not a happy camper these days. The rest of
> the world (save possibly western Europe) teetering on the edge of the
> economic drain, and yet inside the U.S. the last thing he wants is for
> money to be cheap so yahoos can easily borrow and bet on an ever-rising
> stock market...
> Brad DeLong

Then perhaps you can explain to me why he cut rates three times in less than two months, one of them craftily timed to coincide with options expiration in the exchanges; this while M2, consumer credit and bankruptcies growth was (is) at double digits, savings rates the lowest since the Depression, and any yahoo can borrow 150% of his annual income in unsecured loans for personal consumption. Which is all the more shocking in a sadomonetarist (to borrow Doug's expression) who has made a point of keeping rates unnecessarily high except when his banker friends needed easy moeny to survive.

Or why he has refused to raise margin requirements. Margin trading is not what it was in the 20's, accounting for roughly 2% of market cap vs. 20% back then, but this would have probably have a tremendous psychological effect.

Or why he has refused to just come out and say that stocks are insanely priced.

I truly cannot fathom Greenspan. Maybe he is just trying to keep the circus flying until he leaves, and dump the whole mess on his succesor. Senility is another possibility. Any other guesses?

-- Enrique Diaz-Alvarez Office # (607) 255 5034 Electrical Engineering Home # (607) 272 4808 112 Phillips Hall Fax # (607) 255 4565 Cornell University mailto:enrique at Ithaca, NY 14853

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