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Thanks for a rare piece of unconventional thinking. I have no way to figure out
how valid such a theory could be but it sure remains a nice plan B scenario to
keep in mind!
Gwenn
BruceB wrote:
> For a few months now I've been coming to the painful conclusion that Alan
> Greenspan isn't a very unintelligent man. He has raised interest rates
> three times and has indicated more raises are coming for no justifiable
> reason. His first excuse was the spector of price inflation. When evidence
> of such never materialized, he started talking about low unemployment rates
> and wage inflation. When that didn't stick either, the overvalued stock
> market became the bogeyman. Of course, raising margin limits would be a
> much better way to attack that (supposed) problem, and yet he chooses to
> raise interest rates instead. For years Greenspan hinted to lawmakers that
> the reason he couldn't lower rates was because federal deficit spending was
> artificially stimulating demand to a dangerously high level. Now that we're
> running a surplus, he raises rates anyway.
>
> Despite some occasionally positive words about the "new economy," he's made
> it clear he doesn't feel the business cycle is dead. When better and better
> productivity numbers kept coming (which shouldn't happen this late in the
> so-called business cycle), he actually stated he was concerned about the
> improving productivity because it was enticing consumers to spend more!
> What this all adds up to is a man totally out of touch with reality. He
> claims he wants overvalued high tech stocks to fall, and yet his rate
> increases just push more money into them. As Louis Rukeyser recently
> stated, "the only justification the Fed has given for continuing with this
> misguided policy is that it hasn't been working".
>
> Then it hit me. Greenspan is not only not stupid, but an absolute genius!
> Here's my theory:
>
> Greenspan not only accepts the new paradigm and the new economy mantra, he
> is a radical supporter of it. To him, the emerging technology companies not
> only represent a fundamental change in how business is done, they represent
> the key to America's economic prowess and competitive advantage in the
> future. To Greenspan, the hyper-growth of these companies is not only good,
> but absolutely crucial. Although the business outlook for these companies
> is good, he sees a very serious problem on the short-term horizon- a
> scarcity of workers.
>
> Greenspan publically claims to be worried about the effect of a labor
> shortage on consumer prices, but the truth is he's really worried that the
> low unemployment rate will significantly hinder the growth of new economy
> companies. He knows the laws of supply and demand will eventually solve the
> problem on its own, but he feels America can't afford to lose even a single
> minute if it wants to maintain its dominance of the high tech world.
> Greenspan wants to speed up the process, so what does he do? He raises
> interest rates, while at the same time he increases the money supply.
>
> Greenspan is fully aware that rising rates won't hurt new economy companies.
> Almost all of them acquire their capital in the equity markets, and have
> very little debt. The old economy companies, however, are a different
> story. The combination of higher rates and energy costs has begun to hurt
> the profits of these businesses. What will be their response to this
> tougher economic environment? Layoffs. Where will these idled workers find
> jobs? With new economy companies.
>
> To keep the new economy engine running at full steam during this transition,
> Greenspan keeps the money supply high. That money flows right into the
> stock market and right into high tech stocks. This keeps them awash in cash
> to continue to capture market share. The fears revolving around Y2K issues
> (which Greenspan knows is bogus) gives him the perfect excuse to expand the
> money supply.
>
> Of course, Greenspan can't just come out and say what he's doing. The world
> economy expects the Fed to be a conservative, slow-changing institution.
> Such radical talk could seriously rattle markets around the globe, and
> jeopardize his job. Rather, he just keeps preaching the "eternal vigilance
> against inflation" philosphy to the public and to politicians, who don't
> know any better.
>
> Hey, you gotta admit, it's one of the better Greenspan conspiracy stories on
> this list...
>
> Bruce
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