C'mon Greenspan, Do the Locomotion...

Live and Learn

SAN FRANCISCO -- Upon further review of recent columns, it seems I've been on a bit of a (ahem) tirade against Alan Greenspan for using monetary policy to target the stock market, or -- at least -- giving the appearance thereof.

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A reader emailed about this subject this weekend, honestly asking why I thought it was such a bad idea. I repeated many of the arguments expressed here previously, from moral hazard, to the fact that targeting equities (or any other market) is not what monetary policy is designed for and that past attempts to use it for such purposes have ended in failure.

I compared Greenspan to a stoker in an old-fashioned, coal-fired locomotive. With the "train" (a.k.a., the U.S. economy) losing speed as it headed up a steep hill, stoker Greenspan shoveled coal madly into the fire in January when the Federal Reserve cut interest rates by a combined 100 basis points. The Fed's aim then, and now, was to get the train to the crest of the hill before it stalled out. ...