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To understand his thinking you have to understand the big picture.
The name of the game is "Maximum Sustainable Growth".
The overall goal is "Long Term Survival of Human Species and Life on This Planet."
The only way we humans can survive long term, since the earthly resources are
are being depleted at accelerated rate, is through technology. Technology should
allow us to decrease the rate of depletion of natural resources to a minimum, maximizing the
duration of the survival of human species on this planet, decreasing pollution,
decease, etc. The indirect measure of technology is productivity. For
technology to advance productivity needs to increase. One person should
be able to do the work of 5 then 6 then 7 then 8 etc. as time goes by
and consume less resources.
Maximum sustainable growth is simply economic growth at highest possible
growth rate with lowest possible rate of fluctuations in this growth.
Those fluctuations in the growth rate can actually get out of hand and can
bring negative consequences such as recession, depression or crash.
Look at it as a rising line with bands on both sides. As growth rate nears
the upper bad - the economy is overheating and if it goes below the lower
band the economy is too slow. The FED's job is to monitor the fluctuation
rate through different economic indicators and control it through interest rates
by increasing or decreasing the money pool available or to keep the line as
straight as possible, slope as high as possible and pointing up. As the rate gets outside
the upper band FED will raise rates and make it harder for businesses to borrow
money from banks resulting in contracting economy - tight money supply, vv if
it get below the band. The reason that FED does not like the market is obvious: as the
bubble grows things get out of hands and the line goes above the upper band,
the economy is overheating, consumption and depletion increases, life becomes a party.
Economics is the "science of allocating scarce natural resources" explains
it all. Basically we either gradually deplete our resources and this planet turns into another
lifeless
planet or we build Garden of Eden through careful planning and technological innovations.
Up till about 1930 we were doing the first and only in this century we started planning and
implementing the second and only in the '90s we are starting to understand how to do it
and how to get the things under control. That's the main theory. There are other theories too...
Robert W Cummings wrote:
> This Fed chairman really hates the stock market going up. Wants a down
> market deflation instead of growth or slight inflation. You can't fight the
> trend or Greenspan. I don't understand his thinking or think he should
> manipulate the market but he's the boss. Done okay so far.
> Robert
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