Don't blame Bush, don't blame Daschle. IT'S GREENSPAN'S RECESSION

ALAN IS LOWERING INTEREST RATES LIKE THERE'S NO TOMORROW - - - I THEREFORE ASK, WHY DID HE HAVE TO RAISE INTEREST RATES SO HIGH TO BEGIN WITH- ISN'T THAT WHY WE'RE IN THE FIX WE'RE IN, with stocks 30 percent or more below the beginning of 2000? Thanks, Alan.

Make no mistake about it, the 0.4% decline in third-quarter gross domestic product had virtually nothing to do with the September 11 terrorist bombings and virtually everything to do with massive monetary mistakes made by the Federal Reserve over the past two years.

Blame for this downturn must be placed squarely at the doorstep of the central bank. President Bush is right to say that the terrorist attacks "affected our workforce and our business base," and the economic aftershock of 9/11 would by itself have caused a temporary fourth-quarter contraction of about 1% of GDP. But the third-quarter drop — which probably will be backdated to a recession that began last winter — could have been avoided were it not for massive monetary mistakes.

In the first place, nobody told the Federal Reserve to ratchet up its basic money supply by 17% in 1999, and then deflate it by 3% in 2000. This was a pillar-to-post policy gyration and it was sheer lunacy. A massive money excess followed by a huge money shortage caused national income to careen upward unsustainably and then spiral downward later. This was the root cause of the recession.

The Fed chairman's reputation was supposedly that of a cautious incrementalist. Instead, Alan Greenspan gave us unprecedented monetary volatility. No wonder the economy spun out of control. .....Well, the recession-creators have in fact pumped $40 billion of new cash into the economy since the 9/11 terrorist bombings. Year-to-date, the Fed's basic money supply has now grown by 8.5%, a considerable improvement from last year's 3% decline rate. These are moves in the right direction. And if tax policy falls in line, we may soon bury this private-sector recession. But that's if it falls in line.

It is important to understand that at the very heart of this slump is the downturn in business. While class warriors on Capitol Hill attempt to block greatly needed business- and personal-tax relief, the contracting corporate sector is now forcing job layoffs faster than politicians can increase unemployment compensation. ....

Senator Daschle's stimulus proposal, however, is nothing more than an ineffectual, government-entitlement spending bill — not a tax cut — that would merely redistribute income. The Democratic package has no incentive effect that would raise after-tax economic rewards for innovation, investment, and work effort. Hence it could actually block economic growth rather than spur it. ...

A modest combination of tax cuts and central-bank money creation should provide sufficient new investment and work incentives — and the liquidity to finance them — to get economic growth back on a 3% recovery path next year. But again, these would be moves in the right direction, and not the solution. Remember, a normal recovery rate historically runs in the 5% range. This is why comprehensive tax reform and simplification should remain on the policy front burner, and why the Federal Reserve must develop a monetary reform plan that will place real-time financial and commodity-price indicators at the center of its money-creating operations.

Greenspan cranked interest rates up & up & up in 2000 only to chop them down & down & down & down & down & down & down & down in 2001.

If that were the worst thing Greenspan ever did, I'd be thankful. Greenspan is the all-time champion taxpayer bailout king. While they tell us we are rescuing "poor old Mexico," even an establishment hack like Kudlow acknowledges the truth: you and I are taxed to bail out Citigroup et al. Since they can always count on us to bail them out, think they will do it again? and again? and again?

Moreover, his main point here is the capital squeeze that has choked off growth.

Kudlow alleges Greenspan is doing something that Greenspan would have no motivation to do and quotes erroneous statistics to demonstrate his point. What do you find so compelling in this argument?

Deucy says:

Kudlow alleges Greenspan is doing something that Greenspan would have no motivation to do and quotes erroneous statistics to demonstrate his point. What do you find so compelling in this argument?

Greenspan cranked interest rates up & up & up in 2000 only to chop them down & down & down & down & down & down & down & down in 2001. ... Moreover, his main point here is the capital squeeze that has choked off growth.

Greenspan clutched and arrived at wrong-headed policy due to mis-analysis, not "motivation". In your future reference to statistics, please explain the rationale for the Fed's actions over the past two years as they rocketed rates up only to draw them down faster than a Las Vegas huer working for a tip ....

Kudlow would be a great Secretary of the Treasury. Who do you recommend??

Kudlow would be a great Secretary of the Treasury. Who do you recommend??

Not someone with a Wall St./Banking background like Rubin or Kudlow. I'd go with someone from industry like O'Neill

I simply don't get it how this guy gets by with relatively little criticism - - - when he's the principal author of our economic downturn. He said he didn't like stocks so high - and he darn well did something about it, with two years of ever-rising interest rates. The prospect of middle Americans becoming financially self-sufficient in large numbers was apparently too awful to imagine - so he spared the upper classes from the "threat" of ecomonic competition from an upwardly mobile middle class. As a result, people's retirement portfolios have been set back dramatically, and life prospects for many have drastically deflated. Forget Enron and Lay, forget Daschle and Clinton - GIVE YOUR THANKS TO ALAN FOR THE FIX WE'RE IN.

the economy might not in fact be on the verge of recovery as so many are saying.

This gives him cover to lower rates again for the 12 time in 13 months.

We both agree that an unelected, unaccountable individual acting in relative secrecy is anathma to a free, democratic society. You, however, only object to tight money and not to easy money as well. I object to both. Because anything other than the free market decisions in a free market of non-privileged market participants can avoid extreme swings in the business cycle. As famed Austrian economist, Ludwig von Mises says:

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

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