quotes

Doug Henwood dhenwood at panix.com
Sat Mar 25 15:02:18 PST 2000


"We can readily describe this process [of bubble formation], but, to date, economists have been unable to anticipate sharp reversals in confidence. Collapsing confidence is generally described as a bursting bubble, an event incontrovertibly evident only in retrospect. To anticipate a bubble about to burst requires the forecast of a plunge in the prices of assets previously set by the judgments of millions of investors, many of whom are highly knowledgeable about the prospects for the specific investments that make up our broad price indexes of stocks and other assets." -- Alan Greenspan, speech at a conference sponsored by the Comptroller of the Currency, October 14, 1999

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.

But bubbles generally are perceptible only after the fact. To spot a bubble in advance requires a judgment that hundreds of thousands of informed investors have it all wrong. -- Alan Greenspan, testimony before the Joint Economic Committee of Congress, June 17, 1999

"The consensus of judgment of the millions whose valuations function on that admirable market, the Stock Exchange, is that stocks are not at present over-valued.... Where is that group of men with all-embracing wisdom which will entitle them to veto the judgment of the intelligent multitude?" -- Prof. Joseph Lawrence of Princeton in 1929, before the Great Crash (quoted in Robert Shiller, Irrational Exuberance)



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