"While everyone enjoys an economic party the long-term costs of a bubble to the economy and society are potentially great. They include a reduction in the long-term saving rate, a seemingly random distribution of wealth, and the diversion of financial human capital into the acquisition of wealth. As in the United States in the late 1920s and Japan in the late 1980s, the case for a central bank ultimately to burst that bubble becomes overwhelming. I think it is far better that we do so while the bubble still resembles surface froth and before the bubble carries the economy to stratospheric heights. Whenever we do it, it is going to be painful, however.”
Larry Lindsey, Federal Reserve Governor, September 24, 1996 FOMC Minutes
“I recognize that there is a stock market bubble problem at this point, and I agree with Governor Lindsey that this is a problem that we should keep an eye on... We do have the possibility of raising major concerns by increasing margin requirements. I guarantee that if you want to get rid of the bubble, whatever it is, that will do it.”
Alan Greenspan, September 24, 1996 FOMC Minutes
"Where a bubble becomes so large as to pose a threat the entire economic system, the central bank may appropriately decide to use monetary policy to counteract a bubble, notwithstanding the effects that monetary tightening might have elsewhere in the economy.
But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade? And how do we factor that assessment into monetary policy? We as central bankers need not be concerned if a collapsing financial asset bubble does not threaten to impair the real economy, its production, jobs, and price stability."
Alan Greenspan, December 5, 1996, Speech to the American Enterprise Institute
As you may recall, the bubble denial by the central banksters was vehement, until everything collapsed in 2001.
Greenspan was taken aside by Robert Rubin after that 'irrational exuberance' speech.
And that was that. Until it all imploded, and then it was observed, 'who could have seen it coming?
Stocks were lower today, weighed down by concerns about the spread of the Covid D variant, and China's get tough regulatory policy towards its own big cap techs.
The NDX led stocks lower, but managed to gain some off the bottom.
You might recall what happened last week when stocks dropped sharply on Covid concerns.
Hint: the concerns were fleeting to say the least, and stocks went back to new bubblicious euphoria.
Silver was hammered along with stocks.
Gold was a bit higher. The Dollar was lower.
FOMC tomorrow.
Curb your expectations.
Have a pleasant evening.
