Greenspan: We've seen this turmoil before
Report: Economic bubbles can't be defused through interest rate adjustments, he suggests in speech.
September 7 2007: 6:07 AM EDT
NEW YORK (AP) -- "The human race has never found a way to confront bubbles," Former Federal Reserve Chairman Alan Greenspan said Thursday in reference to the euphoria that can precede contractions, or reactions, like the current market turmoil, according to a published report.
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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."
There you have it, folks! From The Great Maestro himself. This thing needs to unwind on it's own and that is it. The sooner the better.
3 comments:
We'll see if we truly live in a capitalistic society. If so, let things play out the way that they should. The market will regulate itself.
However, I strongly suspect that there will be a lot of tampering from the FED to soften the inevitable.
Dr. Greedscam is of course correct in his statements.
But why didn't he say this 2,3,4 years ago when he was in the saddle and was pushing rates down relentlessy and even giving the thumbs up to "suicide" adjustable mortgages? At no point did he suggest that the housing market was in the grips of "irrational exuberance", to use his own phrase; or that the credit was completely out of control.
He did not do his job, and his statements now seem cynical and mendacious in the extreme, in view of his posture at the peak of this insanity.
He did not do his job, and his statements now seem cynical and mendacious in the extreme, in view of his posture at the peak of this insanity.
September 7, 2007 11:15 AM
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Time will tell that he DID do his job...... America will be lot different once this all over.
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