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No inflation?
hmmm.....
-----Original Message-----
From: Daniel Goncharoff <Daniel.Goncharoff@xxxxxxxxxxxxxxxxxxxx>
To: realtraders@xxxxxxxxxxxxxxx <realtraders@xxxxxxxxxxxxxxx>
Cc: realtraders@xxxxxxxxxxxxxxx <realtraders@xxxxxxxxxxxxxxx>
Date: Wednesday, March 08, 2000 10:40 AM
Subject: [RT] Re: Alan Greenscam, Public ENEMY Number ONE
>It is important to understand the problem faced by Greenspan.
>
>The market goes up in an 'irrationally exuberant' way. He says he will
>take away the punch bowl as soon as he sees signs of the party getting
>out of hand, ie, when he sees inflation rise.
>
>The economy keeps growing at a healthy pace. But inflation doesn't rise.
>Instead, the increase in wealth from the stock market is reinvested, not
>spent.
>
>This leaves Greenspan with a dilemma. Does he raise interest rates
>anyway, risking stifling the economy and creating a deflationary
>environment? Or does he wait for signs of the stock market bubble
>translating into artificially higher asset prices?
>
>Obviously, he has done the latter. But inflation is not there. The
>wealth effect is much smaller than economists would have expected.
>
>The FT recently had an article saying that spending patterns of
>individuals reflect a 75% expectation of a serious market downturn.
>
>Perhaps it would have been better to assume that raising interest rates
>would not have an important economic impact. Perhaps not...
>
>Regards
>DanG
>
>
>
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