WHY BE NORMAL?
Greenpsan must be considering this question everyday now.
It is amazing to think that only a few years ago the Fed Funds rate
was at 6.5%!
And, now it's at a 46 year low of 1%!
HOW DID THIS HAPPEN?
Well, it was really part of Greenspans effort to "save the bubble."
The stock bubble LASTED SO LONG that it became the NEW NORMAL FOR
WALL STREET!
INDEED, BUT FOR THE BUBBLE THE CLINTONIAN GOLDEN AGE MIGHT NEVER HAVE
OCCURRED. IT WAS THE CAPITAL GAINS ON THE BUBBLE THAT PAID OFF THE
BUDGET DEFICIT. AND FLUFFED UP THE JOB MARKETS IN THE 90's.
ASTOUNDINGLY, THE BUBBLE OF THE 1990'S WAS SO COMPELLING THAT IT EVEN
SUCKED MONEY OUT OF COMMODITIES!!
BUT DON'T EVER PLAN TO SEE THAT AGAIN IN YOUR LIFE TIME. INDEED, IT
MAY BE AN ECONOMIC ANOMALY WORTHY OF A FEW BOOKS, AND A PHD
THESIS OR THREE!
Second, the off-shoring of American "good jobs" ie private sector
union jobs, made wage inflation MIRACLOUSLY disappear!
GREENSPAN CALLED AMERICA'S DECLINE IN GOOD JOBS, THE "PRODUCTIVITY
MIRACLE."
(They always invent "good" ways to describe "bad" things. eg. Tax
Hikes are revenue enhancments. Investment Trusts of the 1920's
became Mutual Funds in the 1960's. etc.)
But alas, the speculators (aka "dementors" for Harry Potter Fans) have "discovered" commodities again. FINALLY!
And, the demand from China keeps reminding them very day that they
have found the Holy Grail of Investing for the next decade or two.
What would the economy look like if Fed Funds were back to 6%? Yikes!
For one, a whole bunch of mortgages and other long tern "debt
instruments," like corporate and government bonds, and preferreds,
WOULD HAVE TO BE DISCOUNTED MIGHTILY AND QUICK!
NOTE, GENTLE READER, THIS "MASSIVE DISCOUNTING" ALONE COULD CAUSE A
SERIOUS RECESSION;
AND THE DROP IN NET WORTH AND LIQUIDITY IN DEBT MARKETS COULD BE
WELL,........UNPREDICTABLE!
But fear not, we are told that Greenpsan will be like the man who cut
his dogs tail off one inch at a time, because he thought that cutting
the tail off all a once would hurt the dog too much!
That's the good news! The bad news is that YOU ARE THE DOG!
SO, DOES A WELCOME RETURN TO NORMALCY LOOM?
THAT COULD HAVE THE WASHINGTON AND WALL STREET ASKING:
WHY BE NORMAL! A LOT SOONER THAN YOU THINK!
Postscript: Furthermore, Greenspan is like the man who "paints
himself into a corner." Details to follow. So stay tuned! More mind-
numbing hackneyed metaphors to come! GAURANTEED! HONEST!
