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General discussion

Alan Greenspan told by prominent Economist to increase interest rates! (erhem, sound familiar?)

Mar 9, 2004 12:45AM PST

Oh gosh, do I hate to say, "I told you so". OK, not really, it actually feels fairly good! What I find gratifying is his call of a 2 percent raise, which is the same I had said was needed. He and I differ however on the time frame for it, he prefering it be quickly, I that it be phased in over several year time frame and the schedule of gradual increases fully stated ahead of time.


http://money.cnn.com/2004/03/08/news/economy/fed_rates/index.htm

"Morgan Stanley chief economist Stephen Roach, long among the most bearish observers of the U.S.economy, on Monday reiterated a recent plea to Federal Reserve Chairman Alan Greenspan that he made last month: raise short-term rates. Now. By a lot. "Based on the Federal Reserve's own assessment of recent and prospective vigor of U.S. economic growth, it is now time to reload the monetary cannon," Roach wrote in a note to clients posted on the Morgan Stanley Web site.

"A failure to do so ... is a recipe for a never-ending outbreak of asset bubbles. Largely for that reason, I have urged the Fed to raise the federal funds rate immediately to 3 percent."
(more at page link)

Discussion is locked

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You da' man, James! -nt
Mar 9, 2004 12:55AM PST

.

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A Greenspan Joke
Mar 9, 2004 1:19AM PST

Allan Greenspan is back in his old college town many years after graduation and decides to drop in on one of his old professors. He happens to see a copy of an exam sitting on the desk so he picks it up to look at it. Upon deciding that it looks familiar he comments to the professor that it is the same exam that he had taken 30 years ago. The professor assures him that this is correct but adds that this time the answers are different.

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A trip down memory lane.
Mar 9, 2004 1:10AM PST
http://reviews.cnet.com/5208-6130-0.html?forumID=50&threadID=5275&messageID=64398

Dec 2003 (more at link above)

In my opinion, they need to tighten the money up a bit, have interest rates slowly increase about two points so that retirees could earn at least 5% on Certificates of Deposit. This would increase the burden on the working people, cause some price increases of products, but also relieve some of the burden on the elderly and their dwindling returns on their lifetime savings.

Greenspan unfortunately went thru the inflation years of the 70's and seems deathly afraid of it coming back and has gone too far the other way. People who have savings need a way to make a decent return on them and 3% per jumbo CD for 24 month commit is just not giving a decent enough return to retirees. When you realize this and then also realize that in an often desperate effort to find greater return on their money that retirees have made risky investments in the stock market at a time they may have decreasing intellectual acumen to deal with it, then you can see a problem growing for the future care of them when they lose those savings.


shorter CNET link

(a few days ago)
The highest interest rate you can currently get on a Jumbo CD ($100,000) is about 2.8%, which means a retiree wanting security of his money will need at least a million dollars set aside in various CD's. The yeild for a million dollars at those rates would be about 30K per year income. Most retirees have nothing near that, some may have 2-300,000 from savings and home sale, moving into an retirement apartment to lower living costs and maintenance. Retirees should be able to get at least 5% return on their cash. Meanwhile the banks are rolling in cash due to Greenspan, they are making high profits because it's being robbed from the retirees by Greenspan's obsession in lowering interest rates more than they should have been.


Another post of mine on Greenspan and raising interest rates
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Re:Lets give you a well deserved hand
Mar 9, 2004 1:20AM PST

Applause !! Applause!