Bad, BAD Federal Reserve Chairman (according to Trump)

Are small rises in interest rates always bad? Should the stock market keep going up forever as long as Trump is president?

Amidst a torrent of news signaling a president in meltdown mode came reports that Donald Trump wants to fire Fed Chairman Jerome Powell for raising interest rates. This confirms the “president with fifth grade understanding” meme which has become so prevalent.

After the financial crisis (or depression) of 2008, the Federal Reserve kept interest rates artificially low for nearly a decade in order to stimulate economic growth. This was medicine for a badly ailing economy, but it came with side effects: Artificially low interest rates inflate the price of assets such as stocks. Speculators borrow money at super low rates and invest it in the stock market. As a result, the market soars to dizzying heights, from which it must inevitably fall because these heights are out of kilter with reality. By the end of a long bull market run fueled by low interest rates, stocks are simply not worth what people are paying for them. It’s like a game of musical chairs where no one wants to be the last one to sit down, or the last one left holding a basket of stocks bought at prices which far exceed the underlying worth of the companies whose shares they represent.

At Dow 25,000 and above, the stock market was a balloon inflated to the point that merely glancing at it might have burst the bubble. After a period of low interest rates, it’s the Fed’s job to gradually raise rates to reasonable levels to restore order to the marketplace. Stock market speculators may suffer. But do you know who was suffering during the extended period of low interest rates? Seniors who hoped to live off the meager interest from their savings. Now, as interest rates move toward historic norms, the stock market may come down, but there will be a better, more realistic balance between different asset classes — less “funny money” and a return to investing based on sound valuation.

Trump seems to have no clue about economic cycles. He thinks the stock market should just keep going up as long as he’s president (and the sun should always shine on days when he wants to play golf). Policy experts warned him not to take credit for a rising market, lest he own a market crash — but did he listen? No.

Michael Howard

The views expressed are my own, and do not represent any other person or organization.

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Greenspan Bobblehead Shocks Nervous Britons – UPDATE

Why’d the Beeb do it?

alan-greenspan-BBCFriday was a day of well-rounded insanity for the United Kingdom, with reverberations felt ’round the Western world and some parts East. The pent-up demand for faux freedom led to renewed cries of Texit! (Texas seceding from the United States) and Sexit! (Slovenia seceding from the European Union). Probably when the dust settles, it will be found that the appetite for such changes is less real than imagined. But the present period is one for calming of waters and not further exciting residents of Blighty. So it was exceeding strange when a BBC interview with former Fed Chairman Alan Greenspan which should have had a palliative effect instead took on an air of the shocking and surreal.

The interview had been scheduled in advance, but Mr. Greeenspan came down with a head cold. Yet, it is well known that the mere manner in which he snaps his briefcase can soothe troubled markets, and when the Nagus himself appears, the effect is all but narcotic.

Rather than cancel the interview or conduct it purely by telephone, the Beeb elected to put up a bobblehead of Mr. Greenspan, just as one might prop up a stuffed animal to comfort a young child waking from a nightmare.

The bobblehead is, of course, a uniquely American institution, born of fan giveaways at baseball stadiums, but occasionally extended to non-sport VIPs like Pope Francis. There are relatively few bobbleheads of economists, and after careful consideration I conclude that this is for good not ill. Economists are best left to work behind the scenes rather than gracing car dashboards and curio shops. Just one look at the Alan Greenspan bobblehead should persuade doubting readers of the verity of my thesis:

The Alan Greenspan bobblehead

The Alan Greenspan bobblehead

Suffice it to say, the calming effect yearned for was not in evidence among BBC viewers, who flooded the switchboard with complaints that much as they love their Doctor Who, now was not the time to be showcasing the latest monster dreamt up by children writing in to Blue Peter — a possible successor to the Abzorbaloff.

When queried about the cock-up, the characteristically brusque Jeremy Paxman — called out of retirement to conduct the interview — replied, “No comment.” To restore public order, the Beeb enlisted Basil Brush to help explain what Brexit would mean to the average Briton:

basil-brush-youre-screwed-animEnhanced security was put in place at retirement homes over concerns that young people might blame seniors for sabotaging their future plans for free travel and a united Europe:

old-people-walking-animFears of atonal music and riots in the streets prompted the Beeb to temporarily revert to a schedule of old-time programming with more reassuring presenters offering lessons in post-Brexit economics:

(I wonder: Is Oswald The Ostrich an appropriate meme for those voting “Leave”?)

Once calm was restored, plans for a Nouriel Roubini bobblehead were quickly scrapped — as was the Greenspan bobblehead. There are rumours of a Richard Dawkins bobblehead, but as yet no one believes in its existence, and the so-called ‘Bobblehead Delusion’ is being roundly scoffed at by cynics.

The Home Secretary is said to be working closely with the BBC’s head boffin to carve out a new policy on bobbleheads — one that doesn’t ban their use outright, but does flash a brief disclaimer so that epileptics and those easily succumbing to fits of hysterical laughter are properly forewarned.

Jeremy Paxman on Alan Greenspan

“Tomorrow’s Greenspan: more of the same! I don’t know why they make such a fuss about it.”

extra-credit-projectThough public viewing of Alan Greenspan bobbleheads may cause mass insanity, individual viewing in the home may have a beneficial effect, not unlike a mild emetic. You can spend a pleasant rainy afternoon assembling your own Alan Greenspan craft project out of pipe cleaners, Silly Putty, head cheese, and India ink. Here’s how:

First, make a flower out of different coloured pipe cleaners. Next, cut and trim the head cheese to fit inside the flower. Then shape a slab of Silly Putty to form a smaller concentric circle inside the head cheese. Finally, use India ink to draw Alan Greenspan’s head on the Silly Putty. (Be careful not to spill the ink!)

When you’re done, you’ll have a valuable curio which you can treasure in years to come. It also makes a great gift for an economist, parole officer, or that special someone in your life.

blue-peter-badgealan-greenspan-craft-project-by-michael-howard

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