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Below is an excerpt from a piece on TheStreet.Com with a comment for the new
paradigm crowd. Thought it of interest...
JW
abprosys@xxxxxxx <mailto:abprosys@xxxxxxx>
It's been more than 18 months and about 40% in market price appreciation
since the original Alan Greenspan first warned of "irrational exuberance"
and "asset price bubbles." (See the three-year chart of the DJIA, S&P and
Nasdaq above.) He reiterated those warnings, if in somewhat more nuanced
wording, in Humphrey-Hawkins testimony last week. It's a good thing we'll
soon be able to make copies of the original, because Greenspan virtually
admitted that he has been taken hostage by the clones and cronies of Asian
capitalism. They have got their economies so messed up that he can't make
monetary policy as domestic U.S. conditions require (maybe we can speed up
normal scientific protocol and clone some people of working age), but must
be "aware that monetary policy tightening actions in the United States could
have outsized effects on very sensitive financial markets in Asia."
Some of the smartest people in the business have put forward explanations
for why what seems to be, in historical context, an egregious overvaluation
condition is, in fact, not. Paradigms have shifted, productivity is
unbounded, inflation is extinct, communism is dead, the dollar rules, and
the Internet millennium is at hand. Even the federal budget is in surplus.
But if Greenspan can't tighten because he's hostage to Asia, then these
clever reasons verge on rationalizations of an "irrational exuberance" fed
by a fire hose of liquidity. Until something unique and original happens in
Tokyo, that fire hose and those rationalizations would appear to be safe.
Jim Griffin is the chief strategist at Aeltus Investment Management in
Hartford, Conn.
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