Bring Back Greenspan?

The markets sold off Wednesday after the Federal Reserve cut short-term rates by 1/4 percent to 2 percent. Apparently, a lack of clear guidance as to inflation and future cuts spooked investors - profit-taking from the recent short-term rally may have also contributed. The NASDAQ underperformed the Dow Jones Industrial Average and S&P 500 Index yesterday after outperforming in recent days.

Now, I am not an economist, but I am concerned about inflation and the Fed's apparent lack of concern about it. Every day I see, read, and hear about anecdotal examples of dramatic price increases in areas such as food, services, etc.

Pumping more money into this economy in the form of cheap interest rates is not the solution to inflation in my view, and could even contribute further to a weak dollar and inflationary environment. Massive government spending under the current Administration has not helped the situation, either.

Alan Greenspan, Former Fed Chief, was lambasted often in the 1980s and 1990s for his hawkish inflation stance during a period of virtually no inflation. He was blooded in the 1970s, when inflation and high interest rates were rampant.

In retrospect, could we use a little Greenspan/Inflation Hawk in our current Fed Chief, Ben Bernanke? Dropping rates to stimulate mortgage and other lending is not going to curb inflation, in my view, or help a pathetically weak dollar.

And to those who say the weak dollar helps our businesses sell cheaper overseas - I agree this may be true, but what of the 1990s, when a relatively high dollar did not stifle economic growth and corporate profits and sales?

Just my two cents.

Comments

[Asbytec]

As I understand it, the housing market crisis...the credit crisis...is causing much liquidity to vanish into the same thin air it was created from. To keep the economy from imploding, the Fed acted decisively to boost liquidity.

And they did so at the expense of inflation, of course. You cannot fight both battles simultaneously. The Fed sill begin fighting inflation soon enough, and hopefully with the same vigor if fought a slowdown in spending. I suspect we will settle into a phase of lower sustainable growth nothing like the excesses of Greenspan's years. That's good.

I am thankful Bernanke did not buy (much) into the idea we were in a solvency crisis. I have grown to like Bernanke over the past two quarters. He might have just saved our bacon. If liquidity folded, we might well have been reeling from a severe recession or, maybe, even a depression.

Just my two cents, which aren't worth as much as they were a year ago. The dollar will improve in time.

[nukldrager]

If you read his book, "Age of Turbulence", he eloquently predicts the possibility that with newer technology, the creation of new complex credit derivatives that even those who created them don't understand, the likely hood was high for the probability of a crisis in the credit markets sometime soon. If he saw the curve coming, why didn't he use his brakes?

President Woodrow Wilson after creating the Federal Reserve said:

"A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world. No longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men."
~ Woodrow Wilson ... quoted from wikipedia, again... atrobb

[sivere]

Sure,

first TakeBackTheFed.com

then bring Greenspan before congress to explain what they find.

[nukldrager]

sivere... I'm sure your hearts in the right place, but I'm not going to a site that says "take back the fed" because we never had the fed. The fed belongs to the bankers, and the gov, and they're not going to let anybody take it away from them. They only need the economy like a self sufficient farmer needs his cow. Except that the farmer probably takes better care of his cow. You'll have to take Congress back first.

[saifl]

Greenspan was Hawkish? Next you will be saying that we should buy the Zimbabwe dollar as a hedge against inflation!!!!

[iThinkBig]

If Greenspan listened to his own research and thesis papers he conducted when he was younger and had moral scrupals, he would have stated clearly to the Administration that the housing bubble should have been pricked in 2006. That all mark to market deravitives given a AAA rating should be examined by the SEC very closely before being distributed to global investors.

If I knew this in 2006 and I am simply a CEO of a small company, why didn't Greenspan do this? It's called greed at the expense of your entire nation and this is an attitude that is unfortunately far reaching.

[The Trucker]

Everyone wants to concentrate on the housing and credit crisis, and what Bernanke is or is not doing, what Greenspan did or didn't do.

I for one do remember seen Greenspan a few years ago testify before Congress, and him telling Congress that if Congress didn't act and real in the Housing Industry and particularly the Mortgage Lenders, when the meltdown came it would make the Savings & Loan fiasco look like Disney World.

Well, Congress did nothing, people who shouldn't have received mortgages continued to receive them. Builders, real estate agents, mortgage brokers, all made lots of money. And now, we the American Tax payers must bail out all these..... I'm trying to think of a nice word.... all these "CHEATERS", because they all cheated and lied to circumvent the system and make money. Even the so called victims, the "Poor Home Owners" are also to blame, come on people we all know how much we earn, and what we can and can't afford.

People, although we must learn from the past, we must also pay attention to the future. In my opinion a great part of our inflation is being caused by the "GREEDY OIL INDUSTRY". Now a day the price of just about everything is going through the roof, and it all stems from the cost of gasoline and mostly diesel fuel.

It's very simple, just about everything around you, at one point or another has been on a truck, as the price of fuel rises, the price of goods increase.

Everyone claims that transportation cost have increased, thus the price increase, although many times, the actual trucker is not receiving any more compensation for his or her services. Please allow me to explain: In many cases the additional transportation cost is being banked by "Greedy Manufacturers" who refuses to pay "fuel surcharges" to the end transporter, but still passes this cost on to the end consumer, thus increasing their Profit Margins.
And in other cases some segments of the transportation industry are pretty much ruled by "Transportation Freight Brokers", most of these companies are non-asset based, meaning they own no trucks, all they have is an office, a telephone line, a computer, and a desk. They have contracts with manufacturers to move their freight, in some cases the "Freight Brokers" do collect the "Fuel Surcharge" but again in many cases, this money never makes it into the pockets of the persons incurring the fuel expense...the actual truckers. Instead many unscrupulous "Freight Brokers" (NOT ALL) keep the money as an added profit to their bottom line. But what some Freight Brokers don't seem to realize is that their actions are putting many independent truckers out of business, and in time they will put themselves out of business, why? Because, the Freight Brokers need and depend on the small independent truckers for their own existence. When most independent truckers go out of business, they will have to compete with the "BIG BOYS", the J.B. Hunts, the Schneider’s, of this world.

Everyone is affected by the price of fuel. Therefore, Congress needs to find a way to bring down the price of oil.
One way is to capitates the profits an oil company can make, I'm sorry, it sounds harsh, but it's hurting our economy. How many of you feel real sorry for the executives of these large oil companies and their exorbitant salaries with their "Golden Parachutes". If the oil industry was doing poorly, they would have their lobbyist asking Congress for help, am I wrong? So, why can't Congress say to them: Hey, boys and girls enough is enough. Why can't Congress take away all their tax breaks and subsidies?

We also need a President with some backbone, I for one don't care, it can be man or woman, black or white, (just not a BUSH) we just need a person with enough backbone to stand up to the Royal Saudi Family and let them know that if it wasn't for the blood and lost lives of the American soldier, Saudi Arabia would now be ruled by Sadam Husein. And the daughters and wives of the Royal Saudi Family would now be members of the harems ruled by Husein and his sons.

People, I wasn't born in this country, but came to this country at a very young age, although some people would consider me a foreigner simply because I was born in another country, "I am" an American Citizen and I bleed Red, White and Blue.
People, the American dream is slowly dying, our economy is hurting, the dollar gets weaker each and every day, American companies in their greed for higher profits continue to export jobs to third world countries such as India, the Philippines, and other countries, thus their economies are starting to burst at the seams while ours is dying.

I am not an economist, but I truly think that in order for us to control inflation one of the things we need to do is to control the price of oil. I monitor the price of fuel every single working day, and I remember that after Katrina hit, everything started to go down hill from there. The oil industry has used every single excuse to continually increase the price of fuel, and as I said that affects each of us.
Also, American companies who make most if not all of their profits by selling to the American public should not be allowed to export jobs to other countries. Lately have you called tech support at Dell, or Sprint just to name a few, where do they answer you from? India, the Philippines, etc, am I wrong?
American dollars are leaving this country to pay for wages in other countries, that money is being spent in their economy, thus making that economy stronger, while ours gets weaker. We are contributing to making our future competitors stronger. I know there are those who say we need a strong global economy, I say CHARITY begins at home.
Like I said I'm not an economist, but Congress (forget our current President) needs to wake up. Our economy is dying, remember I operate a trucking company, before you buy it and take it home, chances are it has been on a truck. Freight volumes have decreased dramatically, our economy is not moving.

If anyone disagrees or agrees with me please write me at [e-mail]
And please remember: “Without Trucks, America Stops”

[sivere]

nukldrager says, "...sivere... I'm sure your hearts in the right place, but I'm not going to a site that says "take back the fed" because we never had the fed. The fed belongs to the bankers, and the gov, and they're not going to let anybody take it away from them. ..."

What you say may be true, but we still have the constitution, and it allows Congress to create the fed and "take it back". We need to get Congress to act. This is not a democracy. We do not have a direct referendum. We can only get our representatives to act.

TakeBackTheFed.com