[Homestead] What some of it means

Gene GeRue genegerue at ruralize.com
Tue Sep 25 15:24:50 EDT 2007


On Sep 25, 2007, at 8:43 AM, Don Bowen KI6DIU wrote:

> It is all perception or feel good publicity.  The Fed wants the stock
> market to fly because that number is reported in almost every news
> outlet.

I'm about halfway through Greenspan's book. So far, his perception of  
the stock market has mostly been that he thinks people pay far too  
much for stocks. Here is a quote: "Even rising productivity could not  
explain the looniness of stock prices. On October 14, 1996, the Dow  
Jones Industrial Average vaulted past 6,000 . . . ." (page 174, The  
Age of Turbulence)

>   People may not have any money in the market but when the numbers
> are flying people feel good about the economy.  If the market tanks  
> it is
> reported far and wide and people feel bad about the future of the
> economy.  So the fed bumped up the market, exactly the same thing  
> they did
> just after the dot com bust and exactly what fed the housing bubble.

The Federal Reserve Bank has two primary charges: restrain inflation,  
and maximize employment. Sometimes it is an impossible mission.

The one issue that neither the Fed nor anyone else can fathom, let  
alone predict, is what people will think. People become unreasonably  
fearful or exuberant over conditions that may or may not have been  
planned or expected.

Consumer confidence trumps all else, logical or not. Human nature  
makes much of economic behavior a crap shoot. Greenspan notes that  
the Fed often gets it wrong.


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