Anyone taking bets on what Greenspan will do with interest rates and when?

[keithyboy]

Just heard on CNBC an interview with a so-called "expert" who studied the history of Greenspan hikes in interest rates. It was very noticeable to me that Greenspan raised interest rate THREE times in 2000. Talk about bursting a bubble.

Right now, you and I know that inflation is creeping upward much higher than it was in 2000. But what Greenspan did was to try to hurt the Clinton administration and help burst the stockmarket bubble that was making the economically "unwashed" a little wealthier than the "old money" folks wanted to see. Inflation was not creeping higher in the last day of the Clinton administration, yet Greenspan made his three calculated moves, I think, to undermine the Gore run for the Presidency among other things and to set the stage for the incoming Bush administration to be able to say that the economy was really going south during the last year of the Clinton administration. Now, when we all know that inflation is really going up (quiet as it is kept. I heard one talking head on CNBC say this moring that inflation was not a problem unless you were buying food and fuel...I almost threw my shoe at the TV) Greenspan has done everything he could to pump up the Bush regime, including keeping interest rates at all-time lows. I just wonder if anyone has the historical data on Greenspans rate hikes with respect to which administrations would be affected the most and how (Dems vs Repubs.)? If you know where to find that info, please post a link.

[ProfessorGAC]

1. He Won't

He didn't burst the bubble in 2000. That's a free marketeers' canard.

He's an inflation hawk. I don't dispute that he was guilty of overcontrol. Too many interest rate changes when the changes in economic conditions and pricing were not statistically significant. That tends to make things more variable than they need to be, but it's extraordinarily unlikely to trigger any large and sudden shifts in economic performance. There is no data to suggest that it was any more than a tangential effect.

The biggest effects appear to be two things: The incoming administration talking tax cuts caused a lot of profit taking which shifted money out of the market, just as the Dotcom bubble was bursting. (And, well it should have. A 500 to 1 P/E ratio is just plain ridiculous.) So, the fall in the market and the shifting of assets into cash and cash equivlents changed the velocity of cash and reduced consumer confidence.

Remember, most of the public doesn't understand the difference between economics and finance. So, if the market falls, they think "BAD" and retract.

For this reason, i don't think Greenie is in any hurry to move rates. Inflation is not enough a concern, unless energy really continues to pressurize all other prices. I think he will stand pat unless that happens, or the bond market explodes and the bond yields become too disconnected from the discount rate. (This grossly discourages spending and borrowing, which is an economic drag. Raising rates can't help this, and he's got no lower to go.)

Anyway, that's my prediction from knowing economics and understanding his past motivations. (Although i disagree with him on theory, much more than i agree.)
The Professor

[keithyboy]

4. Thanks for your input.

I also remember Clinton saying that he didn't think the interest rates should have raised during 2000.

[fob]

2. I guarantee rate increases from the second meeting of the fed

after Pres Kerry's inauguration until Greenspan is replaced by Lawrence Summers.

The increases will occur earlier when Kerry goes from close lead to big lead as November approaches. Don't rule out a rate hike in October which will be leaked as a response to a "possible Kerry admin".

[kalian]

3. Up until October of this year....

I believe that he will keep intrest rates where they are.
Of course, by then inflation will really have taken off and he might
be under some BIG pressure to start raising the rates.
Then again...he actually believes that the consumer debt that this
country has is "good" and "manageable". The issue also will depend
on how far the dollar tanks...and believe me, it will tank and hard.

Either way, the economy is screwed and the little guys will have
to cough up the paybacks...