Greenspan speaks!

Greenspan speaks to Jon Stewart. Mainly just to plug his new book.

but...

JS: "What is that? when they say the stock market went crazy, when it went up 350 points because they lowered the interest rate a half a point. Why?"

Greenspan: "Because a very large number of people hadn't expected it, and lower interest rates generally mean higher stock prices"

JS:"When you say unexpected it makes me wonder is this a game of expectation if they said were gonna lower this thing a point and it only goes down a half a point will stocks go down?"

GS:"No, the reason is everybody is looking at the same body of data. You know what's going up you know what's going down. The Federal Reserve the federal open market committee, their agency that makes these decisions, has the same data as everybody out there is looking at. So the markets adjust as to what they expect the fed to do because they expect the fed to be looking at the same data. When they don't quite do that the markets move rather rapidly"

JS: "So the Fed or whoever is leading it could in fact, if he wanted to, Goof on all of us?"

Gs: "he wouldn't want too."

JS:"When you say open market, Many people are free market capitalists, and always talk about free market capitalism and that is our economic theory. So why have a fed?
Wouldn't the market take care of interest rates and all that? why do we have someone adjusting the rates if we have a free market system"

GS: "You are asking a very Fundamental question (segway to jokes)... You didn't need a central bank when we were on the gold standard back in the 19th century, these automatic things occured because people were buying and selling gold and the markets would (naturally) do what the fed is doing now. But, Most everybody in the world by the 1930's decided the Gold Standard was strangling the economy, and universally it was abandoned. But, you need somebody to determine, or some mechanism, of how much money is out there because remember the amount of money equates to the amount of inflation in an economy. The more money you have, relative to the amount of goods the more inflation you have.

JS: "So we're not a free market then? Theres a benevolent hand that touches us..."

GS: "your quite correct to the extent that there is a central bank governing the amount of money in the system; that is not a free market and most people call it regulation."

An amazing Lesson in Basic American Economics. And if you know anything about the market, a few suggestions are thrown in just for good measure.

wooot greenspan!




Video Link

Worth the watch even if you don't like money. =)