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PAX, LUX ET VERITAS SINCE 1965
Post re: US: Greenspan Says Odds Rising for Recession (Tor Guimaraes, US)
Created by John Eipper on 12/20/07 6:53 PM - re-us-greenspan-says-odds-rising-for-recession-tor-guimaraes-us

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re: US: Greenspan Says Odds Rising for Recession (Tor Guimaraes, US) (John Eipper, USA, 12/20/07 6:53 pm)

Randy Black wrote on 19 December:

"Tor Guimaraes stated on Dec. 18 (that) 'the bursting of the dotcom
bubble was a serious attack on the retirement funds of middle class
workers under the Clinton government. The Fed could have prevented
it...' Tor's claim is unsupportable factually. I would welcome any
ideas that he has that might enlighten us regarding his claim."

Tor Guimaraes responds:

As you know, to restrain inflationary bubbles in general the Fed could
have raised interest rates. To restrain the dotcom bubble the Fed
could also have increased margin requirements. By its inaction
allowing the creation and subsequent bursting of the dotcom bubble the
Fed allowed the loss of several trillions of dollars to the common
investors, retirees, etc. I know people ready to retire who were
unable to do it because of the dotcom bubble burst. Subsequently,
under the first Bush Jr. administration, the Fed lowered rates and
allowed the creation of the housing bubble.

Regarding the Fed's responsibility promoting the housing bubble the
maestro himself has indirectly admitted it. About a week ago
Greenspan was interviewed on National Public Radio by Steve Inskeep.
While dismissing the Fed's responsibility for promoting the housing
bubble, Greenspan said: "...we've had housing bubbles in two dozen or
more countries around the world, all of which look almost identical to
ours and the reason why we've had these bubbles everywhere is
everybody's long-term rates have gone down, and that in turn I trace
back to the extraordinary events that occurred when central planning
became an obviously inefficient way to operate an economy." However,
a few moments later Greenspan said "there's only one thing we could
have done [to prevent the housing bubble], cutting off short-term
credit. That would have broken the back of the economy, and brought
the housing boom down."

-- For information about the World Association of International Studies
(WAIS), and its online publication, the World Affairs Report, read its
homepage by simply double-clicking on: http://wais.stanford.edu/

John Eipper, Editor-in-Chief, Adrian College, MI 49221 USA




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