Daily Speculations

The Web Site of Victor Niederhoffer & Laurel Kenner

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7/28/04
George Zachar on Meyers

For a dose of "Fed Watching For Dummies", I recommend Larry Meyers' book A Term At The Fed.

It is NOT rocket science, NOT counting-driven, and is full of beltway anecdotes.

BUT it shows Greenspan to be both totally in control of the Fed (the rest of the FOMC has essentially no input in monetary policy), and also to be essentially reactive.

Simply put, if the economy IN HIS OPINION is weakening for whatever reason, given all precedent, he will abort the tightening cycle, and go to neutral/easing. There is no doubt about this in my mind.

As for the real estate bubble, recall Greenspan's emphatic refusal to act on the 90s stock bubble, even though in private he had identified it as such. His consistent stance has been that it is "cheaper" for the Fed to deal with the aftermath of a burst bubble, than it is to arrest a bubble's development proactively.

I welcome any dispute with my analysis, but for all of Greenspan's mystique, I think his uber-approach has been quite transparent.