He's Back in the News

This Wall Street Journal story($) finds Alan Greenspan back in the news for not saying something that he purportedly said that may have influenced the bond market.

Rumors about remarks made Thursday night by former Federal Reserve chairman Alan Greenspan helped send Treasury bond yields lower Friday and increase expectations of a Fed rate cut, market participants said.

However, two people who attended the event where Mr. Greenspan spoke said he didn't say anything about likely actions by the Fed, as some rumors suggested.
...
During the event, Mr. Greenspan was asked about whether he thought growth or inflation was the greatest risk facing the economy, a question apparently meant to elicit his view on what the Fed should do next. He declined to answer, the people who attended said. As he often has in the past, he noted Paul Volcker refused to discuss monetary policy after Mr. Greenspan succeeded him as chairman, and Mr. Greenspan intended to do the same for his successor, Ben Bernanke.

Mr. Greenspan did say that much of the run-up in housing prices has apparently been due to speculators and investors, not homeowners, and that low interest rates world-wide have played an important role in underpinning housing, the people in attendance said. He also said it is not yet possible to say whether "mortgage equity withdrawal" is yet affecting consumption, and that it may never be possible to know for sure. Mortgage-equity withdrawal, a concept he has popularized in the U.S., refers to the ability of homeowners to increase their purchasing power by taking out larger mortgages.

More likely it was the manufacturing report on Thursday that left a foul taste in the mouths of bond market participants through the day on Friday.

Note the confessional in the second to last paragraph - the Chicago Fed says the housing boom was a result of wealth creation technology, or something like that. Here it seems pretty clear - low interest rates and speculation. Oops, my bad!

ooo

Here's this week's cartoon from The Economist:


Note that this is President Al-Bashir of Sudan, and not U.S. President George Bush.

And a special bonus - as long as the scanner was already warmed up - opposite the cartoon, this ad from the law firm of Bingham McCuthchen could not be passed over.


Grrrhhh!