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Our Friend at the Fed

Greenspan understands that the Web is the single greatest inflation-fighter of all time.

Greenspan definitely gets the Web. In fact, if he didn't, I am confident that we would be in a Fed-induced recession right now. In fact, judging from the hawkish statements away from Greenspan from the Fed governors, I think he may be the only guy who gets the Web. Those other guys see prices rising everywhere. Probably some sort of age thing.

What makes me think this?

A little while ago I got this email: "I am sitting here signing up for



5-cents-a-minute long distance, buying cross-country tickets on



for 200 bucks, looking at an ad for a $399 PC in the paper and watching Greenspan talk about the risk of inflation. Please explain."

I think the thrust of this message is right. The price competition from the Web and from technology that is related to the Web is tremendous.

The Web is the single greatest inflation-fighter of all time. In fact, I think the reason why short rates aren't at 6% is because Greenspan understands this. He has kept rates down in a way that the other non-Web people on that board would never go for because he is on the Web. I say this because I read everything this guy says. Religiously. Every word. I do a textual analysis of this stuff the way I used to do in college. I parse his every phrase.

All he talks about now is productivity, the Web and the greatness of the Web as an inflation-fighter. He totally gets it. He is our 72-year-old Web friend. I bet he doesn't even read faxes or printouts anymore. He reads the screen. He knows this.

But he also knows something else: Demand for technology hires and for Web hires has outstripped supply, and that has happened because Web companies can pay their people well above the prevailing wages because of the buoyant stock market. Greenspan doesn't want people to be paid in lottery tickets, and he doesn't want people to feel that they can be paid in ever-rising stock options. That breeds speculation. He worries that the stock market could destroy price stability.

Notice in his testimony this week that once again he referenced Japan in the late '80s. He always does this now as a counterbalance to his productivity thesis. That's because the Japanese government let the stock market take control, and the stock market got out of control to the upside. Wealth became so easy that people leveraged to the hilt to buy stocks. (They never really had wage inflation, just stock inflation, but it was just as insidious.) When the market crashed, the country crashed.

This is the real tension, Web vs. stock market, for Greenspan, not pricing power. There still is no pricing power. As I write this, I am hearing number cuts in paper stocks. I see downgrades in

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. The gold stocks collectively seem to be marching to zero. No, it is not pricing. And the priceline name-your-own-price model does threaten to infect every industry. I have written ad nauseam about the power of the Web to wreck pricing in media (trucks, paper, fuggedabout it) and a whole host of other industries. (Would you really be willing to invest in a CD store knowing that kids have ceased to pay for CDs because they download them for free! That's deflation writ large! And what a bunch of shorts those companies that sell CDs must be!!)

As long as Greenspan can balance productivity gains with keeping speculation in check, he will pull off a high-growth Japan without the speculation that ensued. Let him do his job without second-guessing. He is the best there is. But understand he seems like the lone Web friend on that board. He deserves our compliments, not our criticism.

He is one of us.

Random musings



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is back to its old numbers. Cut a check to

Sun Micro

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and get that memory problem fixed, and I'll get bigger in your stock!

James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund was long Sun and eBay. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at