>My reaction to the speech is that it is premature to reach such a
>conclusion. One needs first to have a better understanding of
>the consequences of the burst bubble. If the US turns out like
>Japan, then clearly more should have been done earlier to prevent
>the bubble and its accompanying imbalances from having grown so
>large. In contrast, if the US economy grows at or above its
>potential long-term rate over the next few years, then Chairman
>Greenspan will be proven correct.
>I also would argue that the Chairman did contribute to the bubble
>by endorsing the rise in productivity growth and by not
>exhibiting greater caution about the equity market's valuation
>during the 1998-2000 period. For example, rather than
>emphasizing that the equity analysts' long-term earnings growth
>estimates of 17% per year in early 2000 were impossible, the
>Chairman argued that the increase in these estimates more likely
>confirmed that corporations had many high-return investment
>projects available and that the rise in productivity growth was
>sustainable.
>Unfortunately, the conference administrators did not allow
>questions or discussion following Chairman Greenspan's speech. That
>would have been very interesting. Most of the people at the
>conference that I questioned about the speech found it defensive
>in tone.
That last fact is interesting. So insulated are our leaders now from the unexpected that even in a rather friendly, handpicked audience, Greenspan got a free ride.
Doug