IHI
09-30-2005, 02:24 AM
http://atimes01.atimes.com/atimes/Global_Economy/GI14Dj01.html
Interesting article I came across regarding the legacy of the Federal Reserve past and present, and the prevailing market conditions.
"All economists agree that when money growth slows, market interest rates go up. Yet the emergence of unregulated credit markets has cast doubt on the reverse causal effect. Rising interest rates no longer necessarily slow money growth. Often they merely make money growth more costly to accelerate asset price appreciation, curiously defined by economists as growth, not inflation. "
"Greenspan's measured pace represents a lack of political courage to acknowledge that it is preferable by far for the finance sector to take a huge haircut (ie fast rising of the discount rate) preemptively than for the whole economy to collapse later. Moral hazard is increased unless risk takers in the finance sector are made to bear the consequences of their actions, and not be allowed to pass the pain from risk on to the economy at large."
So yeah, Americans have too much debt IMO that is too easily written off in personal bankruptcies. Current bankruptcy reform could stop this, but it is enough to prevent successive housing bubbles (I've lived to see a couple) from forming / collapsing?
Then there's the focus on consumption rather than investment spending by the remaining middle class..... destining themselves to be forever hanging by a string by their creditors.....
What do you guys think? Any economists in here?
Interesting article I came across regarding the legacy of the Federal Reserve past and present, and the prevailing market conditions.
"All economists agree that when money growth slows, market interest rates go up. Yet the emergence of unregulated credit markets has cast doubt on the reverse causal effect. Rising interest rates no longer necessarily slow money growth. Often they merely make money growth more costly to accelerate asset price appreciation, curiously defined by economists as growth, not inflation. "
"Greenspan's measured pace represents a lack of political courage to acknowledge that it is preferable by far for the finance sector to take a huge haircut (ie fast rising of the discount rate) preemptively than for the whole economy to collapse later. Moral hazard is increased unless risk takers in the finance sector are made to bear the consequences of their actions, and not be allowed to pass the pain from risk on to the economy at large."
So yeah, Americans have too much debt IMO that is too easily written off in personal bankruptcies. Current bankruptcy reform could stop this, but it is enough to prevent successive housing bubbles (I've lived to see a couple) from forming / collapsing?
Then there's the focus on consumption rather than investment spending by the remaining middle class..... destining themselves to be forever hanging by a string by their creditors.....
What do you guys think? Any economists in here?