Ironic Quote of the Day: Alan Greenspan on Inflation

Tuesday, September 18, 2007 | 07:22 AM

This will be my last Easy Al post for the foreseeable future (you can see yesterday's Greenspan Media Blitz! here)

From yesterday's Guardian, comes this story on former Fed Chair Alan Greenspan: Greenspan: era of low inflation is over:

Britain faces the prospect of falling house prices and rising inflation within a few years, according to Alan Greenspan, the former chairman of the Federal Reserve.
In a series of interviews to promote his memoirs, the respected US economist warned that the era of low inflation was over.

He predicted that the Bank of England would struggle to keep the consumer prices index within one percentage point of the government's 2% target . . .

"That's going to change, because markets are going to start turning round and inflationary pressures are going to start to build," warned Mr Greenspan.

I am compelled to point out the painfully obvious: We have enjoyed an ever-decreasing low interest rate environment, ever since Paul Volcker, the cigar chomping, tough guy, was Fed chairman. He had the colossal cojones to break inflation's back through a series of unbelievably painful rate hikes.

Amazingly, the man who stood 180 degrees to Volcker, the architect of a Fed policy which saw liquidity as the answer to any crisis, who single-handedly did more to promote, provoke and manufacture inflation, is now predicting that the era of low inflation is over. Go figure.

Does anyone else see the irony of this . . . ? 


Greenspan: era of low inflation is over
Graeme Wearden and Ashley Seager
Guardian Unlimited, Monday September 17, 2007,,2170888,00.html

Tuesday, September 18, 2007 | 07:22 AM | Permalink | Comments (40) | TrackBack (1) add to | digg digg this! | technorati add to technorati | email email this post



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» 50 BPS! from
The monetary central planners delivered an upside surprise of their own today, cutting both the federal-funds rate and the discount rate by 50 basis points. Stocks immediately surged when the numbers were released. The Fed had widely been expected to... [Read More]

Tracked on Sep 18, 2007 3:02:47 PM


According to the Federal Reserve Act of 1913, the Fed's mandate is "to promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates."

Since the 3rd one is dependent on the 1st two, the Fed's dual mandate is employment and inflation. Those telling the Fed to cut 50 bps today are ignoring this mandate b/c inflation pressures are clearly evident (implied inflation in the 10 yr TIPS is at a one month high and the CRB index is just shy of a one yr high).

With respect to the statement, the FOMC basically wrote the 1st half on Aug 17th when they cut the discount rate and said, "financial mkt conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward."

Posted by: Peter | Sep 18, 2007 7:28:45 AM

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