The market's pet owl
FROM THE ivy-mantled tower of the Fed- eral Reserve, the odd hoot reassures us that Alan Greenspan still has one or both eyes open. His wisdom has not been called into question, or not yet. When the other day he hintingly hooted that interest rates could fall as well as rise, an Australian bank's economist hailed him as a wonder worker: 'Alan Greenspan has saved the world!' He had done no more than to save the New York stock market to fight and lose another day. He and that market make an odd couple. Every so often on its long ascent he warned it against excess. It took him to heart for a day or two, and then carried on climbing, secure in the belief that its favourite owl would watch over it. Once he warned it about asset price inflation — meaning that inflation can get into share prices, just as it gets into the prices of goods in the shops, and that getting it out again is perilous and painful. Asset price deflation can now be studied all over Asia, and Japan, which caught it first, is still suffering the consequences. They did not worry Wall Street for long. It just carried on inflating.
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