greenspan - & i couldn't agree more

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    Monday, 1 September 2003

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    *** Greenspan speech leaves market unmoved...greatest bamboozle ever...

    *** Japan rebounding? Chinese calling their brokers...

    *** The happiest place on earth...gold up $5.20...Print money? Nah...and more!...including: Mogambo on Monday!

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    "Markets did not react" to Greenspan's important speech last week, says a Reuters report. Most likely, they had no idea what he was talking about. Had they known, the headlines might have been different. "Chairman's speech triggers sell-off of dollar assets," the papers might have reported. "Investors abandon overpriced stocks," they might have said.

    Alan Greenspan was defending himself at the annual get- together in Jackson Hole organized by the Kansas City federal reserve bank. Critics have argued that the Fed chief should have stopped the bubble on Wall Street before it got too big three years ago...and that he over-reacted to deflation fears this year. They suggest that the world's most powerful central banker ought to rely more on specific targets and specific formulae, rather than his own intuition.

    You will recall, dear reader, last September we also commented on Greenspan's speech. Our best-known economist was defending himself last year, too - explaining that he couldn't spot a bubble until it blew up in his face. Even then, he'd had to check the mirror for bruise marks to be sure.

    A bubble is the most exaggerated and dramatic event in the market...the equivalent in politics is war...in romance, it is falling head over heels in love. If it cannot be detected until after it is over, what can? And yet, the Fed chief says that while he was blind to the bubble, he now sees a recovery coming, clearly. What is it about his glasses that makes it possible to see positive developments when they may still be far in the future, but not negative ones when they are right in front of his nose?

    If people really understood the deep context of Greenspan's speech, they would have panicked long ago. Because they would have known that the Fed chairman is nothing more than the mumbling mouthpiece for the greatest bamboozle in world financial history. Here we are, at the beginning of the 21st century, and the entire global economy rests on a compound fraud: that American consumers can continue to take up the world's excess production, forever...and that Mr. Greenspan can see when the economy is headed for trouble and take swift action to lead it to prosperity.

    If people really understood what was going on, they would be spooked and appalled. Mr. Greenspan just 'makes it up as he goes along,' guided by theories that are mostly disproven, relying on numbers that are dangerously misleading and advisors who are recklessly lunkheaded.

    "This speech puts the nail in the coffin of econometrics and its promise of exactitude in economics," notes a more accommodative John Mauldin. "What Greenspan is asserting is that the Fed models are simply not powerful or robust enough to be able to predict anything with a real degree of certainty, no matter how much economists would assure us they do. He opens up a brave new world of uncertainty, and for that candid admission, I say, Bravo!"

    [Ed note: For a more charitable look at Greenspan's speech, see Mr. Mauldin's article on the DR website:

    The Greenspan Uncertainty Principle http://www.dailyreckoning.com/body_headline.cfm?id=3407 ]

    If people really understood how Greenspan and the Dollar Standard work...they would sell their dollars immediately and buy gold.

    Gold, we note, rose $12 last week. Gold stocks were up 7.2%.
 
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