Sunday, December 16, 2007

Alan Greenspan- Shut Up and Go Away

Another bad snow and ice storm up here in Taxachusetts today. I prefer snow during the week so I can take the day off. This weekend storm thing is getting old in a hurry. The New England Patriots are at 14-0, and 2 games away from history. While the Pats have been excellent, if a Indianapolis Colts rematch happens in the AFC title game and the weather is like it was today I have a bad feeling about that game. Have to wait and see.

Alan Greenspan- Shut Up and Go Away
I usually leave the Alan Greenspan related news to the always wonderful Mess that Greenspan Made blog. Since his retirement from the FED Mr. Greenspan has written a book and injected his opinions on just about everything through every avenue possible. The more he speaks, the more I am convinced he is an absolute fool. It is like the really fun uncle you had as a kid. When you were young he seemed so funny and exciting. After you got older you realised that he was a drunk and makes a fool of himself constantly. The new found perception colors your memories of the guy. In the same way, every time Greenspan speaks now he appears as lost and confused by the economic situation as some dolt off the street. The problem is he was HEAD OF THE FEDERAL RESERVE for a long time! It makes sense to me now why the mess in the financial world is so big, this guy was running the show for most of it.

Case in point, today over at Yahoo Finance:
Greenspan: Give Homeowners Financial Aid
Sunday December 16, 5:30 pm ET By Kevin Freking, Associated Press Writer
Former Fed Chief Alan Greenspan Calls for Cash Infusion to Help Struggling Homeowners
WASHINGTON (AP) -- Alan Greenspan, former chairman of the Federal Reserve, suggested Sunday that a tax break or other government financial help for homeowners facing the mortgage crunch would be the best political fix for the economy.
He cautioned against meddling with home prices or interest rates to address the housing problem. Greenspan did not specifically call for a tax cut. Instead, he called for the government to apply money to the severe housing market slump. Such a cash infusion would typically come through a tax break or a new government spending program.
"Cash is available and we should use that in larger amounts, as is necessary, to solve the problems of the stress of this," Greenspan said during an appearance on ABC's "This Week."

Wowza! Where to begin?
It is past the point of hilarity that Greenspan cautions against using interest rates as a tool to help the housing market. This from the "drop rates to 1% and leave them there for a good long time" former fed head. We know Alan never, ever used interest rates as a bailout and prop up tool for the markets. Not him, no sir. As far as having all this cash lying around, I guess he must mean print a bunch of it. The last time I looked the US was still running a massive deficit, so unless Greenspan has a bunch of cash under the floorboards at the New York FED I have no idea where all this money is coming from. He goes on:
Separately, Greenspan said he is concerned about signs of a resurgence of inflation.
"Core inflation is up. Wholesale prices had their highest increase I think in a generation. That raises the specter of stagflation again," said Greenspan, referring to a simultaneous stagnant economy and upward pressure on prices.
He said the Federal Reserve should "do what it has to do to suppress the inflation rates that I see emerging, not immediately, but clearly over the intermediate and longer term period."
Greenspan said a large number of people are in major financial stress, even when they've tried exceptionally hard to make their monthly mortgage payment. But some political solutions would only prolong their agony, he said.
"It's far less damaging to the economy to create a short-term fiscal problem, which we would, than to try to fix the prices of homes or interest rates. If you do that, it'll drag this process out indefinitely," said Greenspan, referring to his preference for a cash infusion to help homeowners.

The man that had inflation blinders on for 18 years now sees inflation all around? Is he for real? I promise I am not making this news piece up. I would be hard pressed for comedic material of this quality. Now look at that convoluted sentence in the second paragraph. Did he really say that mumbo jumbo? Lets break it down;
  • "do what it has to do to suppress the inflation rates that I see emerging" Do what? raise interest rates? He just said to leave rates alone, now use them to actually target inflation? Alan must have caught himself as he said it, and so the second line comes out:
  • "not immediately, but clearly over the intermediate and longer term period" So the FED should not move to fight inflation, that Greenspan says is raging, immediately? how soon then? Over the intermediate and longer time period? What the f%$k does that even mean?

Sir Alan then captures his basic philosophy that he used so well during his tenure at the FED, namely create a short term fiscal problem to provide a quick fix and punt the problem on down the road. I do appreciate his brutal honesty in his closing remarks.

Every time Greenspan speaks, I think people must have a really cold feeling. This was the guy running the show for a long time. He makes no sense. It was probably the ability to communicate through FED press releases and not so much in open question and answer sessions that saved the guy from getting donged a long time ago. I used to wonder how the US got into such a mess, but the recent commentary by Greenspan goes a LONG way towards giving me the answer. The kicker to all of it? Alan hand picked Ben Bernanke to be his successor! HAHAHAHA! I am sure Boom Boom Bernanke is just as great as Greenspan ever was.

2 Minutes to Midnight

Will the markets be able to give the "Christmas Rally"? A while back I would have said there was no way the markets would not close really strong before years end. Events keep happening so fast, that I am no longer sure this week will pass without more horrific news. 2008 is going to be rough no matter what side of any trade or opinion you may be. I had commented before that it feels like most market participants are "holding their breadth" until the new year. I think the holiday break will see some heavy drinking by the boys on Wall Street. I think January the crap is going to hit the fan big time! For a visual, I refer you to the perfect scene from the classic comedy film "Airplane":

Have a good night.

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