Roach on Greenspan
"asset inflation" figures prominently in his analysis - a warning I've been sounding for some time. Asset inflation is when investment demand (money entering capital markets) far outstrips investment supply (businesses that can pay the cost of money).
The solution is simple: increase investment supply. Or to put it another way - dramatically improve the climate for starting new businesses, particularly those with large payoffs.
The picture painted here is that the Greenspan monetary policy is of a piece with the Bush fiscal policy - both benefit those who have, and shaft those who work. When added to the "Lindsey Plan" to sell treasuries and buy stocks to bail out social security - one can see the outline of an attempt to create and foster a bubble in stocks.
People think they like asset inflation - when stocks just go up. The problem is that asset inflation means that stocks are higher than a fully liquid market can support - that is, most people won't be able to cash out.
This should be a concern to people, not because the equities market drives the economy - equities are a means to an end, namely that of putting liquidity at the disposal of people who have some idea of what use to put it to - but because this structure is making it increasingly likely that when the current policy unravels, as it is already doing, then the effects will go far beyond the stock market.