Quote:
Originally posted by hytem
I'm an investor and was a daily market watcher during this period. The market took a hit when Greenspan said irrational exuberance--and it was shortly before he started raising interest rates--stating he was concerned about inflation--which didn't exist. The market took a hit every time he raised the rates, and it was the summer of 2000 before the elections. That big anti-trust case against Microsoft at the time was also a killer for tech stocks. It cast the whole computers future into question.
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I'll correct myself a bit here: Greenspan uttered his irrational exuberance in a Dec. 96 speech, which dropped the market a couple of points the next day, and foreign markets a bit more. There was some surprise at the time at the impact of his remarks. The market rebounded and continued to climb.
His interest rate hikes occurred before the elections during 2000, and were attributed to inflation concerns. It was about the time Bill Gates was getting harrassed by the Justice Dept on anti-trust. The combination killed the market--especially tech stocks(NASDAQ). That's reflected in the charts others have shown here.
It has taken the market 8 years to get back to those prior levels, and tech isn't there yet by a longshot. A lot of people lost a lot of money on NASDAQ. Were stocks overvalued? Greenspan thought so. And he continues to influence the market with his words lately--mostly negative.
As best I can see, interest rates haven't correlated with inflation since the 1980s or early 90s. What's inflationary is the cost of energy (oil). Raising interest rates just kills the housing market, investment and the stock market--and so impacts the economy. Bush and the Fed Chairman know that by now.
What's keeping inflation down is made in China and low food costs. You can't tamper with the China situation (e.g., raising RMB value or tariffs) without creating inflation. Walmart has become too important for the average American.