Word: greenspans
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...sale could send the dollar tumbling - as happened earlier this month when a Chinese official suggested China might shift some of its currency reserves to offset the "weak" dollar. The notion that the days of the dollar's dominance are numbered is, in fact, increasingly popular. In September, Alan Greenspan, former chief of the U.S. Federal Reserve, said it's "absolutely conceivable that the euro will replace the dollar as [the] reserve currency, or will be traded as an equally important reserve currency." If that ever happens, says HSBC chief economist Stephen King, "the dollar goes into free fall...
Market bubbles are not obvious when they are occurring. Even former U.S. Federal Reserve Chairman Alan Greenspan says he's unable to tell for sure when exuberance becomes irrational. While being questioned before Congress a couple of years ago about the 2000 tech-stock meltdown, Greenspan famously said: "As events evolved, we recognized that, despite our suspicions, it was very difficult to definitively identify a bubble until after the fact - that is, when its bursting confirmed its existence...
...cost Chinese production helped to maintain unusually stable prices for manufactured goods around the world is coming to an end. This view isn't held just by a few lonely bears in the wilderness. In his new book and in recent newspaper interviews, former U.S. central-bank chairman Alan Greenspan has been emphasizing that prices for Chinese exports have started to rise, which will contribute to a revival of global inflation. Ben Simpfendorfer, China strategist for the Royal Bank of Scotland, puts it succinctly: "Where China was a deflationary influence over the last 10 years, it will be an inflationary...
Another such problematic comment came in 2004, when he pointed out that many borrowers could save money by taking out adjustable-rate mortgages (ARMS). Many borrowers did save money with ARMs, and the idea that a few words from Greenspan at a credit-union meeting persuaded millions of others to take out teaser-rate loans they couldn't afford stretches belief. But with ARM-related defaults on the rise, it doesn't look good...
...Greenspan successor Ben Bernanke has learned from this and doesn't talk about anything but monetary policy in public. The rest of us, meanwhile, may want to work on weaning ourselves off the infantile belief that everything that happens in our economy, good or bad, is the doing of the Fed chairman...