Don’t Do It Mr. Greenspan

Discussion
May 03, 2005
George Anderson

Editorial by George Anderson

If all goes as expected, Alan Greenspan and the members of the Board of Governors for the Federal Reserve Bank will raise interest rates tomorrow by a quarter of a point.

It will be the eighth consecutive meeting the Fed has chosen to up the rate in an attempt to head off inflation while assisting the economy to grow at a sustainable rate.

While many, if not most, economists support the Fed’s action to date, USA Today reports that some are beginning to wonder if Mr. Greenspan and associates need to be as concerned about inflation with the economy appearing to pull back.

Count us among those who think the Fed should leave rates alone. Of course, we have a history of questioning Mr. Greenspan. Here is a piece we had published back in December 2000.

How the Greenspan Stalled the Economy!
by Dr. Screwloose (AKA George Anderson)

Every investing investor likes shares to go up.

But the Greenspan at the Fed said enough is enough.

The market is crazy.

Kid geeks getting rich.

Paper millionaires and dot-coms, it just made him twitch.

The Greenspan hated inflation more than boiled prune stew.

It had to be wiped out, what could he do?

Last year and this, he fumed and he fussed.

“I’ll rate hike and rate hike, inflation I’ll bust.”

“I must find a way, if it’s the last thing I do,

to slow the economy, the one they call new.”

But around him were doubters. They thought he was nuts.

Forget about rate hikes give us some cuts.

The prime rate ascended. The cost of borrowing went up.

The Greenspan never wavered. He wouldn’t let up.

One hike, two; three, four, five and six,

the Greenspan continued, inflation he’d fix.

Everywhere he’d turn, no inflation was found.

But, he didn’t care. It must be around.

Now business has faltered.

Many dot-coms have flopped.

Earnings are down.

Will the Greenspan now stop?

Unemployment is rising.

The stock market’s down.

There is no soft landing.

We’ve plunged to the ground.

Last week in New York the Greenspan did speak.

To community bankers, the man is a freak.

He concluded and alluded that inflation was tamed.

The market went crazy. Our nest eggs are saved.

But why, we wonder, did it take so long

for the Greenspan to realize he was terribly wrong?

But enough of the past, let’s look straight ahead.

What can we expect from the Greenspan and Fed?

The Greenspan and cronies, together will meet and rates they will lower.

Oh, won’t that be a treat?

Moderator’s Comment: Has the Federal Reserve gone far enough in raising interest rates at this time? What impact will further rate increases have on
consumer spending and retail?

George Anderson – Moderator

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3 Comments on "Don’t Do It Mr. Greenspan"


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Bill Bittner
Guest
Bill Bittner
15 years 10 months ago

Unfortunately Mr. Greenspan is no longer able to think solely of what is right for the US economy, he must also consider what foreign investors want in order to keep financing the budget deficit.

As the declining dollar continues to wither into foreign earnings, the only recourse is to raise interest rates so that foreign investors will see some sort of return on their assets.

It is true that higher interest rates will negatively impact the economy, but they should also have a positive impact on the value of the dollar.

Gene Hoffman
Guest
Gene Hoffman
15 years 10 months ago

An Ode to Dr. Screwloose: It is always thus, impelled by a state of mind which is destined not to last, that the Fed and Alan Greenspan make irrevocable decisions on interest rates.

Whether the rate is increased or not there will be little impact on consumer spending — at least not for that reason alone.

Mark Burr
Guest
15 years 10 months ago

I see little or no impact. Rates increased a quarter point or not still remain at 30 year lows. Spending has never been the issue. Two conflicting reports came out this week. One says consumer confidence is at its lowest point in some time and the other says new home and existing home sales are at all time highs. One would seems to contradict the other – wouldn’t it?

Spending has maintained the economy before and especially after the drops of 9/11. Business investment remains to be the issue and slower than hoped for (although steady) job growth. At some point business needs to have a little back bone and re-invest at levels comparable to the way the consumer has continued to reward them.

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