Thursday, January 24, 2008

What would Greenspan say

“It is important that the Federal Reserve not follow a flawed strategy. I fear that with a reduction of 75 basis points or even 100 basis points today, which as you know a number of people are suggesting, stock prices could still fall, leading too many observers to conclude that monetary policy is ineffective. This is a potentially dangerous view in my mind especially among the broad array of those who do not participate in the equity markets. If we do 50 basis points and stock prices fall further, as they well might today, it is the central bankers who may be perceived as intellectually inadequate, not policy itself. This is far less dangerous to the economy!”

- Greenspan in 2001

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