Re: B. DeLong weeps over victimization of R. Rubin
On Apr 17, 2007, at 10:30 AM, Carl Remick wrote:
Curious how Bob Kuttner knows more than I do, or indeed than Alan
Greenspan does, about why Alan Greenspan believed (correctly) in
the 1990s that he could keep interest rates low without generating
higher inflation. Greenspan says that he kept interest rates low
because (a) the deficit was smaller, (b) because higher investment
made possible by lower deficits was increasing the rate of growth
of potential GDP, and (c) because the computer revolution provided
a further big boost to the growth of potential GDP. I think
Greenspan’s right about the (multiple) reasons he bet that he could
keep interest rates low without triggering higher inflation.
Kuttner thinks different.
This is hearsay, but very well-sourced hearsay: According to a JP
Morgan economist, who reportedly got it straight from a Federal
Advisory Council
the mid-1990s, and resisted calls from the bond ghouls and his Fed
colleagues to tighten. Additional details: Greenspan was on the JPM
board before joining the Fed, and JPM used to be referred to as “the
second Fed,” because of its prestige and closeness to power.
Doug