Berkeley CSUA MOTD:Entry 39325
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2025/07/09 [General] UID:1000 Activity:popular
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2005/8/28-29 [Finance/Investment] UID:39325 Activity:low
8/28    http://www.msnbc.msn.com/id/8873875
        Personally, I think that Greenspan is doing a really lousy job.
        Everyone knows that during the crazy dot com days the rate should
        have been climbing and go much higher, but instead Greenspan failed
        to react, and finally responded in late 1999 and CRASH! Then as the
        housing sector started to go crazy in 2002, he failed to react
        again. He finally realized it in 2004 started to play a little
        bit of catch up. It seems as if Greenspan the old man can't keep up
        with the pace of modern economy. The sudden drop and gain reminds me
        of how old men drive. They brake and accelerate really fast, because
        they simply don't have the reflexes to react to the world around them
        \_ Personally, I think you know little of what you speak.
           \- IAOC, M. FRIEDMAN once analogized an active monetary policy to
              a fellow sitting in the back seat reaching over now and then and
              giving the steering wheel a yank. [this was a call-continuation
              of the metaphor used in "The Economic Steering Wheel" by
              A. LERNER]. ok tnx.
           \- in an odd coincidence, M. FRIEDMAN once analogized an active
              monetary policy to a fellow sitting in the back seat reaching
              over now and then and giving the steering wheel a yank.
              [this was in response to the metaphor used "The Economic
              Steering Wheel" by A. LERNER]. ok tnx.
        \_ I agree with you on the dot com bubble, but the housing bubble
           is happening during a period where the economy isn't doing
           that well, and he is under the constraint of not pushing it
           into recession.
           \_ "The biggest risk for his successor could turn out to be a
              collapse in housing prices after the frenetic run-up that has
              resulted in part from the Fed's policy of keeping interest rates
              so low [because the Fed was worried about the slim possibility
              of a broad deflation].  But another key principle of the
              Greenspan Fed, which most experts have come to accept, is that
              the central bank should focus on economic fundamentals and not
              try to prematurely pop a market bubble in stock prices or real
              estate prices."
              [I guess it's now ok to split infinitives.]
              http://www.nytimes.com/2005/08/26/business/26fed.html
2025/07/09 [General] UID:1000 Activity:popular
7/9     

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www.msnbc.msn.com/id/8873875
Eye on the E conomy Central bank raises rates another quarter-point With economy growing briskly, Fed indicates more increases highly likely Rate chart The Fed has raised the benchmark overnight lending rate ten times since J une 2004, when it stood at 1 percent. Profile E-mail The Federal Reserve raised short-term interest rates a quarter-point for the 10th time in 14 months Tuesday and indicated that more rate hikes ar e likely because of inflation pressures stemming from the briskly growin g economy. As widely expected, Fed Chairman Alan Greenspan and his fellow policy-mak ers raised the benchmark overnight lending rate to 35 percent, compared with a 46-year low of 1 percent in June 2004 when the Fed began raising rates. Major commercial banks quickly followed by raising the prime rat e for the most creditworthy businesses and consumers to 65 percent. The Fed repeated language it has used consistently over the past year to signal further rate hikes, supporting the case of analysts who expect th e central bank to continue tightening credit at the same steady pace, br inging the overnight rate to at least 4 percent by the end of the year. "The end of the tunnel is not in sight," said Ethan Harris, chief US ec onomist for Lehman Bros. "Core inflation has been relatively low in r ecent months and longer-term inflation expectations remain well containe d, but pressures on inflation have stayed elevated." The statement went on to say that "policy accommodation can be removed at a pace that is likely to be measured," language that in the past has si gnaled quarter-point rate hikes. Bush upbeat about economy The steady string of quarter-point moves, which have become almost routin e, is unprecedented in the recent history of the Federal Reserve. In the past, rapidly changing economic conditions have forced the central bank to respond more aggressively by making moves of a half-point or more, o r by making "extra" moves between scheduled meeting of policy-makers. This time around, Fed Chairman Alan Greenspan and his colleagues have bee n able to stick to their word by raising rates in a "measured" fashion, moving exactly a quarter-point at each of the past 10 consecutive schedu led meetings. There are two more meetings this year, and many analysts now expect the c ycle to continue into 2006, even after Greenspan, 79, retires after 18 y ears in his immensely powerful post. Greenspan's term ends in January an d he is not eligible to be reappointed. Goldman Sachs, for example, this week raised its interest rate projection s, forecasting that the Fed will raise the overnight rate to 5 percent b y mid-2006, up from a previous forecast of 45 percent. Rich Yamarone, d irector of economic research for Argus Research, set a target of 525 pe rcent and noted that Fed officials have suggested that even a half-point rate hike would still be considered "measured." "At this point in time I guess they have got to have something pretty dra matic to stop them - either a sharp deceleration in inflation or a sharp deceleration in growth," said Diane Swonk, chief economist of Mesirow F inancial in Chicago. Employers added 207,000 jobs last month, enough to absorb new workers and draw some in from the sidelines, keeping the unemployment r ate steady at 5 percent. On the inflation front, signs are a bit more mixed, with the latest repor ts showing that inflation was a bit above the Fed's target late last yea r but has declined a bit since then. Many economists have been surprised that the steady increase in oil and gasoline prices to record levels ha s not yet had more impact on either inflation or growth. "The bottom line is we haven't played through all the lags yet," said Swo nk. One major uncertainty has begun to resolve itself as long-term interest r ates set on the international bond market have begun to rise in tandem w ith short-term rates. That could help cool the red-hot housing market, which has set off some a larms among policy-makers and analysts who fear the rapid unwinding of a n asset bubble could cause a sharp slowdown in overall growth. "With the household sector dependent on housing wealth to sustain consume r spending, it should only take a relatively modest rise in long-term ra tes to take the steam out of the housing sector and for this to lead to a significant slowing in consumer spending," Goldman Sachs chief economi st said in a note to clients Monday. When that happens, sometime in the next six to 12 months, consumer spendi ng growth will likely slow, putting an end to the Fed's rate-hike cycle, he said.
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www.nytimes.com/2005/08/26/business/26fed.html
By EDMUND L ANDREWS (NYT) 2277 words Late Edition - Final , Section C , Page 1 , Column 2 CORRECTION APPENDED ABSTRACT - First article in The Greenspan Effect, periodic series examining Alan Greenspan's 18-year tenure as chairman of Federal Reserve, which is scheduled to end in January; says Greenspan's successor faces near-impossible task of replicating his success in managing monetary policy; holds Greenspan stood for flexibility and freedom from dogma; photo Correction: August 30, 2005, Tuesday An article in Business Day on Friday and an entry in the Five Days feature in Business Day on Saturday about Alan Greenspan's tenure as chairman of the Federal Reserve misstated his age. Please Note: Archive articles do not include photos, charts or graphics.