Greenspan Is Using Monetary Policy to Support Bush

[Yavin4]

Folks, it's official. We're living in dictatorship. The two hallmarks of a dictatorship is that they start wars unnecessarily, and they manipulate monetary policy for political purposes. Case in point, today's GDP growth number was 7.2%. The last time that the GDP came close to this number was in the fourth quarter of 1999, and what did Greenspan do? He RAISED interest rates three times in a row from the end of 1999 through May 2000, even though the federal government was in surplus, not deficit.

Fast forward today, we have a GDP growth rate of 7.2% and a government that's running a record deficit. What's Greenspan's response? He keeps interest rates at their lowest level in 40 years. Greespan is blatantly using monetary policy to prop up the economy and improve Bush's chances for 2004, even though common sense should dictate that he start raising interest rates soon. IOW, the man is pushing us into an inflationary spiral in order to get Bush elected.

Welcome to the Dictatorship!

[NoMoreRedInk]

1. Greenspan raised interest rates in the late '90s to combat inflation.

Because there is no hint of inflation now, he's keeping them low. However, most economists believe they'll start inching up soon.

[Yavin4]

3. Where was Inflation in the late 90s?

I'll bet you a cheap U.S. dollar that inflation was at or very near the same level as it is today. Show me a chart where inflation was out of control in the late 90s which warranted those rate hikes.

[Tempest]

5. There was no inflation in the late 1990s

Greenspan raised interest rates because he said the economy was heating up too quickly.

Now he has no legitimate excuse not to follow the same policy.

[ixion]

8. There was no hint of inflation then, either

he said he was doing it as a pre-emptive measure, which is one of the things that killed off the boom. They kept raising rates until growth was choked off completely.

[loudnclear]

22. He raise rates in the 1990s to combat Clinton!

That's what that was all about. There was no real inflation when greespan raised rates. the original poster is correct.

[alcuno]

2. And when did he finally lower rates in 2000?

Wasn't it following the Supreme Court decision? I remember thinking, "I wonder why Greenspan doesn't lower rates?"

[Yavin4]

4. Actually, he didn't lower rates at all in 2000

He did an emergency rate cut late in January 2001. In the succeeding two years from 2001 to now, he has taken rates from 6.5% all the way down to 1%.

Folks, this is far more serious than Diebold.

[Tempest]

6. The worst part is that * won't be around when this bubble bursts

Whoever comes after * will have to deal with the fallout.

[Yavin4]

7. Neither Will Greenspan

He'll be long gone while we struggle with massive budget cuts, loan defaults, huge tax hikes, and other draconian economic measures to get the economy back.


Most evil dictators and their henchmen wind up in exile.

[alcuno]

17. I was thinking it was late December 2000, but you're right it was

January 2001. I was close and I was right!

[Wellong]

18. Wrong

I was wrong. Sorry. I must have been thinking of something else.

[tritsofme]

9. In 1999

we were operating in the peak of the business cycle and there was a much larger risk for inflation. I thought that Greenspan dropped the ball, and probably should have raised rates earlier than he did, but you have to remember he was trying to avert recession following the 1997 Asian Crisis.

Right now we are still in an intermediary stage, and we can still have large growth in GDP without risking inflation, as well as the fact that 7% plus will not be sustained over many quarters, and will come back down to 4-5% in Q4.

[Yavin4]

13. Here's My Take

we were operating in the peak of the business cycle and there was a much larger risk for inflation.

Yes, but in 1999, federal government spending, a huge factor for inflation because the government can spend and borrow an almost infinite amount of money, was in a yearly surplus. Today, the government is in a record deficit with no signs whatsoever that it will control spending, esp. with an on-going war that's raging out of control.

So, you tell me. We currently have a government that's setting record deficits, a housing market that's out of control, and a stock market that's headed back to late 90's bubble level. To me, this is a far greater risk for out of control inflation than where we were in the late 90s.

Please show me how I'm mistaken.

[tritsofme]

15. Youre absolutely

right, when business investment picks up with the recovery, the huge deficit will probably cause a crowding out in money supply and interest rates and inflation will rise. But you are looking more long term at the problems of a structual deficit. If we are looking between now and next year, I dont see high levels of inflation coming.

[Spazito]

10. Here is an article entitled "Greenspan likes to hide his cards"...

regarding the difference between the US Federal Reserve Board and most other countries in the area of official inflation targets. I found it very interesting. Here is the link:

http://ctv2.theglobeandmail.com/servlet/story/RTGAM.20031029.wbmath1029/business/Business/businessBN/ctv-business

[ignatius]

11. On Tuesday,after the Fed meeting, the text talked about deflation, even

though gold and commodity markets are near 10 year highs. The "deflation" word is what triggered the stock and bond markets. The fed would have known todays numbers including the deflator which surged from 1% to 1.7%.

Greenspan is bought and paid for by the Bush cabal.

[Wellong]

19. Should Greenspan

actively work to tank the economy and defeat Bush? Or work to make economic activity as strong as possible?

[Yavin4]

20. No, But He Should Be Consistent and Accurate

Raising rates through the roof with no risk of inflation and a government in a yearly surplus like he did in 2000 was politically motivated and wrong.

Keeping rates to historically low levels while the government is setting record deficits, a housing market that's in bubble territory, and a wildly speculative stock market is also politically motivated and wrong.

His main goal should be to safeguard the integrity of money supply, not to use monetary policy to sway election results.

[LoneStarLiberal]

12. And When They Start Rising

Look out.

The Fed's played one too many rounds of Russian roulette with its most useful tool of influence. Now they only have one chamber in the pistol left, and there isn't any secret what is waiting on that pull of the trigger.

BANG!

[DBoon]

14. Did a trick like this in 1972

Help Nixon get re-elected? And didn't we have hell to pay with the resulting inflation?

[htuttle]

16. Keep your old W.I.N. button handy

We're going to need them again, no doubt.

[Zynx]

21. This is about average growth for coming out of a recession.

Reagan averaged about 6% EVERY quarter from the first quarter of '83 to the fourth quarter of '84. The same goes for every post-recession period.

Also, don't be so sure he is proping up money supply. Over the last month, money supply has contracted and the year over year growth rates have slid substantially. I don't know if this is a trend on his part, but it certainly is worth noting.

To put today's numbers in perspective, let me show you some numbers from 1975-76 that will put this whole debate to rest:

1975q3 14.9 7.1
1975q4 12.8 5.1
1976q1 14.7 9.8
1976q2 7.6 3.4
1976q3 7.7 1.9
1976q4 10.9 3.3


The right hand side is nominal, the left hand side is inflation adjusted growth. As you can see, Ford had 7.1%, 5.1%, and 9.8% in the quarters leading up to the start of the presidential campaign. Did that help him any? No.

[tritsofme]

24. In order to put that in proper perspective

I would need to know the inflation level for those times as well.

[DemocratSinceBirth]

23. One Quarter Of 7.2% GDP Growth Is Not A Trend....

No need to raise interest rates yet...