A tad askew from the traditional view

Wednesday, November 16, 2005


Greenspan's perspective: if he changes direction, he embarrassingly advertises his mistaken strategy on the brink of his retirement....On the other hand, if he
maintains his ill advised course of raising short term rates, then the negative results (i.e. major recession) would be likely to occur sufficiently down the road, he has to hope, so that his successor would be blamed..............................

Successor's perspective: a no-win situation if you believe,as he might, that the economy is already on a collision course with disaster. But if he maintains current strategy he has to hope it would continue to be known as Greenspan's plan, not his. By continuing to tighten credit the Fed would also be creating the illusion that the it believes the economy is improving, and that has to be part of its game plan.

Likely result: no change in the Fed strategy of barreling forward into the hazardous land of the inverted yield curve......(and any euphoria associated with the usual year-end stock rally should be savored, because - rally or not - the flawed policies of the government at all levels have probably already created the makings of an unavoidable economic crisis down the road)........Dave McGill


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