Earlier this year, Financial Intelligence Report spoke with Sir John Templeton, the renowned global investor, who warned readers of a significant fall-off in real estate prices - in some markets he sees a crash in prices of 50% or more. Some economists have criticized Greenspan for failing to stem the stocks bubble in the 1990s. He also faces criticism for an ultra-low interest rate policy in recent years that some argue has fueled speculation in housing. 'Some argue?' - hah! Creating bubbles, and then bursting them, is a classic way of bringing down economies. First low interest & lots of credit (give them enough rope...) and then high-interest and a credit squeeze (...and we can hang them). They did it before, in 1929, and they did it to Japan more recently. At least Greenspan is nice enough to telegraph his punches. (to avoid being caught with his pants down, now he can say "I told you so", although it comes just at the last minute.) rkm -------------------------------------------------------- From: "Westaway" <•••@••.•••> Subject: Uncertainty Over Stability of 'House of Cards' Date: Wed, 28 Sep 2005 13:50:17 -0700 http://NewsMax.com Date: September 28, 2005 Time: 11:21 a.m. Greenspan Warns of 'Euphoria' In a major speech delivered Tuesday, Federal Reserve Chairman Alan Greenspan confirmed repeated warnings that have been issued in Financial Intelligence Report over the past year. Earlier this year, Financial Intelligence Report spoke with Sir John Templeton, the renowned global investor, who warned readers of a significant fall-off in real estate prices - in some markets he sees a crash in prices of 50% or more. Other Financial Intelligence Reports followed, including stark warnings from former Federal Reserve chairman Paul Volcker who said the U.S. was on the verge of an economic "crisis." Financial Intelligence Report also cited remarks made by Warren Buffett, the nation's richest investor, when he warned real estate prices were grossly inflated. Buffett, who has an aversion to selling assets, recently sold his California home. He said prices there had reached astronomical proportions. Apparently, Greenspan is now worried as well. In his speech, Greenspan warned investors that they shouldn't be lulled into a false sense of security by the economy's long stretch of low interest rates. "History cautions that extended periods of low concern about credit risk have invariably been followed by reversal, with an attendant fall in the prices of risky assets," Greenspan said in remarks to the National Association for Business Economics in Chicago. Greenspan didn't specify what risky assets he was referring to. But most agree he is talking about overheated real estate prices. The Fed chief has been sounding an alarm for months - including an emphatic warning on Monday - about the perils to homeowners and lenders using risky and exotic types of mortgages. In his remarks Tuesday, Greenspan repeated worries he has expressed in the past - that a rise in interest rates may spell trouble for some investors who are counting on rates to stay low for an extended period of time. "Such developments apparently reflect not only market dynamics but also the all-too-evident alternating and infectious bouts of human euphoria and distress and the instability they engender," he said. Greenspan's "euphoria" remark seems eerily similar to his remark about "irrational exuberance" that presaged the dotcom crash - one of the biggest bubbles ever. http://today.reuters.com/business/newsarticle.aspx?type=tnBusinessNews&storyID=nN27724248&imageid=2005-09-23T221407Z_01_WASG119D_RTRIDSP_2_G7-MINISTERS.jpg&cap=U.S.%20Federal%20Reserve%20Chairman%20Alan%20Greenspan%20leaves%20after%20a%20goup%20photo%20of%20G7%20ministers%20outside%20the%20Treasury%20Department%20in%20Washington,%20September%2023,%202005.%20REUTERS/Yuri%20Gripas Exuberance always leads to asset drops-Greenspan Tuesday 27 September 2005, 6:38pm EST By Tim Ahmann WASHINGTON, Sept 27 (Reuters) - Asset bubbles fueled by "market exuberance" invariably burst and policy-makers cannot safely pierce them, Federal Reserve Chairman Alan Greenspan said on Tuesday in what some economists took as a warning to bond market and housing speculators. In a speech in which he once again defended the Fed's decision not to deflate the late-1990s stock market bubble, Greenspan said a successful monetary policy can be a victim of its own success -- by reducing economic volatility that in turn fosters greater risk-taking. He warned that protracted bouts of big risk-taking by investors are always followed by asset-price declines, and he said maintaining the U.S. economy's flexibility was essential to helping it weather the inevitable blows. "History cautions that extended periods of low concern about credit risk have invariably been followed by reversal, with an attendant fall in the prices of risky assets," he told an economics conference in Chicago via satellite. "Because it is difficult to suppress growing market exuberance when the economic environment is perceived as more stable, a highly flexible system needs to be in place to rebalance an economy in which psychology and asset prices could change rapidly," he said. Prices for both U.S. stocks and government bonds rose a bit after his remarks as traders showed relief he had not signaled higher-than-expected interest rates ahead. The Fed chief, who steps down at the end of January after more than 18 years, said the U.S. economy's ability in recent decades to weather a series of shocks -- including the latest run-up in energy prices -- offered evidence of its increased flexibility. "That greater tendency toward self-correction has made the cyclical stability of the economy less dependent on the actions of macroeconomic policymakers, whose responses often have come too late or have been misguided," he said." "It is important to remember that most adjustment of a market imbalance is well under way before the imbalance becomes widely identified as a problem," Greenspan added. The comments reminded observers of Greenspan's now famous warning to stock market investors in a 1996 speech not to get caught up in "irrational exuberance." EXHAUSTING THE BOOM Some economists have criticized Greenspan for failing to stem the stocks bubble in the 1990s. He also faces criticism for an ultra-low interest rate policy in recent years that some argue has fueled speculation in housing. As he has in the past, Greenspan defended the Fed's decision to wait for the "eventual exhaustion of the forces of boom" in the 1990s, saying acting aggressively to deflate the stock market could have led to a "significant recession." "Whether that judgment continues to hold up through time has yet to be determined," he said. He raised the prospect the economy's greater flexibility in recent years could mean a better economic performance. "If we have attained a degree of flexibility that can mitigate most significant shocks -- a proposition as yet not fully tested -- the performance of the economy will be improved and the job of macroeconomic policy-makers will be made much simpler," he said. Some analysts said the speech appeared in part a "victory lap," but one in which Greenspan seemed concerned about the potential for market stress once he leaves office. "As outgoing Fed chairman, he's clearly concerned about the asset cycle and the prospect the low concern on credit risk is going to be associated with a decline in asset prices down the track," said Alan Ruskin, research director at 4Cast Inc. Greenspan did not refer specifically to the low risk premiums evident in the U.S. bond market -- a topic he and other Fed officials have addressed in recent speeches. Those low risk premiums have kept long-term interest rates down, helping underpin swift housing price gains. In a speech on Monday, Greenspan restated his view that "froth" was evident in some local housing markets, but said it was not yet clear if those speculative conditions would reach across the nation as a whole. On Tuesday, he said "fostering an environment of maximum competition" was the best way to ensure economic flexibility. In that regard, he said it was important to ward off misguided efforts to try to protect jobs through trade protectionism and other competition-inhibiting policies. "Protectionism in all its guises, both domestic and international, does not contribute to the welfare of American workers," Greenspan said. "At best, it is a short-term fix at a cost of lower standards of living for the nation as a whole." -- ============================================================ If you find this material useful, you might want to check out our website (http://cyberjournal.org) or try out our low-traffic, moderated email list by sending a message to: •••@••.••• You are encouraged to forward any material from the lists or the website, provided it is for non-commercial use and you include the source. Richard Moore (rkm) Wexford, Ireland "Apocalypse Now and the Brave New World" http://www.cyberjournal.org/cj/rkm/Apocalypse_and_NWO.html List archives: http://cyberjournal.org/cj/show_archives/?lists=newslog _____________________________ "...the Patriot Act followed 9-11 as smoothly as the suspension of the Weimar constitution followed the Reichstag fire." - Srdja Trifkovic There is not a problem with the system. The system is the problem. Faith in ourselves - not gods, ideologies, leaders, or programs. _____________________________ Informative links: http://www.indymedia.org/ http://www.globalresearch.ca/ http://www.engdahl.oilgeopolitics.net/ http://www.greenleft.org.au/index.htm http://www.MiddleEast.org http://www.rachel.org http://www.truthout.org http://www.williambowles.info/monthly_index/ http://www.zmag.org http://www.co-intelligence.org ============================================================