You mean all those people have to get up and go to work every day? No wonder they're discouraged.

The best news is that Alan Greenspan's days as Chairman are almost over.

I blame Greenspan for lowering the interest rates too low in the '90's to stave-off inflation. He messed with the balance of the economic universe. Everything is out-of-whack now as a result of Greenspan not allowing natural events to occur.

A little inflation is not a bad thing. Other market factors adjust to balance out the inflation. But Greenspan loosened the money supply so much that he caused the super-inflation of the housing market.

I most certainly do like 'that sort of thing'.

You know, cowbell and gamer chicks just isn't doin' it for me today. How about some celebratory Kim Richards?

While an economic balance has been partially restored, thanks to some minute but necessary adjustments in the prime interest rates and a restoration of the sound fiscal policies of ...umm...fiscal policies that sound.......due to..

NICE TITS!

I believe Ace was excessively titillated and he may have made a typo in the sentence under the young lady's photo.

I blame Greenspan for lowering the interest rates too low in the '90's to stave-off inflation.

Um, what?

I blame McDonald's for putting too much fat in their food to stave off obesity.

Anyway, Greenspan was (and still is) one of the most relaxed major central bankers in the world on the issue of inflation. Look at the ECB or Japan's central bank to find real inflation-hawks.

Or are you claiming that Greenspan has been too lenient on (asset-price) inflation, i.e., you wish interest rates had been higher? That's a reasonable position, but I'm not convinced that asset-price bubbles need to be pierced by central bankers unless they start feeding general inflation. For one thing, it's hard to tell that asset price increases are inflationary. I know that if the price of a loaf of bread doubles, that's likely due to inflation. But if Microsoft stock doubles, that might be because they're just successful. At what point in the 1990s did the stock market rise stop being caused by technological and productivity improvements and start being caused by inflation? I can't tell that now, much less then.

Loosening the money supply, i.e. lowering rates, keeps inflation in check. Under Greenspan the rate (short term) was like 1-2%. Ridiculously low.

My point was that Greenspan lowered the rates so much it caused a rate-war between m*rtgage lenders. The lenders were putting lots of money on the street and competing with rates as low as 5%/30 yrs. Thus, the real estate market got red-hot. Sellers of property recognized this as an opportunity to raise their asking prices.
What were the results?

A real estate bubble that is so big that when it finally bursts, it will hurt so many people with lost equity and a massive influx of foreclosures.

Greenspan caused this bubble by lowering rates that he said would kep inflation under control. He was partly successful. Average wages and the price of milk has increased modestly in the last decade. The median price of a home, however, has not.

Pompous, do we have a fundamental disagreement that tightening the money supply increases inflation?

I'm (obviously) not an economic expert. But I don't believe it is too complicated simply because I believe a stable economy is self-correcting. The Fed Chairman, under the orders of the President need only make tiny adjustments to the rudder to keep the economy on course. Greenspan was lowering rates 25-50 basis points every meeting.

I contend he did not even allow the results of his previous adjustment take affect before making another, and another.

Bart doesn't seem to know much about interest rates and inflation.

Okay, briefly put:

The price of money is inversely proportional to money supply, just like any other commodity.

Thus, all else being equal, if the money supply is increased, the value of money goes down, i.e. inflation.

The only reason it didn't happen this time is because China and India were exporting deflation, productivity gains were high, and the voodoo doctor in the back room was chanting away for all he was worth.

It's nice to see a drop or whatever they think is happening, but the figure has always been very unreliable (regardless of the administration) because the only people who are counted by the government as "unemployed" are those who are actively receiving unemployment.

Anyone who has run through their benefits (but still do not have a job) drop off the rolls, and those who are not eligible (independent contractors, commission only workers, etc.), or those who have given up finding a job, are not counted at all.

bart-

Pompous, do we have a fundamental disagreement that tightening the money supply increases inflation?

I'm not Pompous-but, Hell yes, we do!

Bart... meet Paul Volcker.

...Volcker's Fed is widely credited with ending the United States' stagflation crisis of the 1970s by limiting the growth of the money supply...

Loosening the money supply, i.e. lowering rates, keeps inflation in check.

No. Lowering interest rates (i.e., lowering the rental price of money) is one method by which a central bank can loosen monetary policy, which in turn (ceteris paribus) increases the money supply. This has the effect of spurring inflation.

Raising interest rates will tighten monetary policy, which will reduce the money supply, which will reduce inflation.

Pompous, do we have a fundamental disagreement that tightening the money supply increases inflation?

Um, I'm not sure whether our disagreement is simply due to mutual confusion or a fundamental disagreement about the nature of the macroeconomy. You correctly analyzed how low interest rates led to rapid price increases in real estate, i.e., real estate inflation. But those low interest rates are indicative of a loose monetary policy and a large money supply, not the opposite.

Put another way, Greenspan could have lowered interest rates by buying Treasury bills on the open market. The increased demand for Treasury bills would have driven their price up. Mathematically, an expensive T-bill has a lower interest rate than a cheap T-bill: if you buy a $100-face-value 1-year T-bill today for $80, the interest rate is ($100 - $80)/$80 = 25% (if I remember the formula correctly). If I buy an identical T-bill tomorrow for $90, my interest rate is only 11%.

So, while Greenspan is driving interest rates down by buying up all the T-bills, he's also shoveling dollar bills out the door to pay for all those T-bills. Thus, he's lowering the interest rate and increasing the money supply. That's a loose monetary policy, and it will tend to increase inflation.

Apologies if I screwed that explanation up; we're reaching back into the fogs of some extremely drunken years.

I contend he did not even allow the results of his previous adjustment take affect before making another, and another.

Well, I can't disagree with that. It takes at least a couple of years for the effects of an interest rate change to fully make themselves felt, however. Should central banks keep rates stable for such long periods of time? Or should they try to "surf" the economic cycle by changing interest rates before the effects are needed?

Actually, there's a simpler way of answering the question.

Pompous, do we have a fundamental disagreement that tightening the money supply increases inflation?

Yes. A tight money supply means there are a lot of goods and very few dollar bills. Thus, each dollar bill should buy a lot of goods, i.e., low inflation.

A loose money supply means there are a lot of dollar bills chasing very few goods. It takes wheelbarrows of bills to buy a loaf of bread, i.e., a lot of inflation.

It's interesting that I never heard about the people who "gave up looking for a job" until Bush became Prez. Who are these people? Where do they come from?

There's only ONE picture of this girl? Dang it. We'll need more if only to keep the economy moving.

Wasn't Greenspan's reasons for lowering the fed to keep inflation in check?

Or was Greenspan worried that de-flation was occuring and that is why he lowered rates?

I am confused.