Free Republic

...Greenspan's two speeches here dwelt less on the successes of his 18-year tenure than on looming risks. As the world economy has become more stable, he suggested, investors have become complacent about risk. "They are exhibiting a seeming willingness to project stability and commit over an ever more extended time horizon," he said. This means they have bid up stock and housing prices and accepted unusually low yields on long-term bonds.... If investors suddenly turn cautious, asset prices and borrowing will plunge. "History has not dealt kindly with the aftermath of protracted periods" of investor complacency on risk, he warned....

The White House search for a successor to Federal Reserve Chairman Alan Greenspan, who is scheduled to retire in January, has intensified.... [T]he three candidates cited most frequently have been economists Martin Feldstein of Harvard University, Glenn Hubbard of Columbia University and Ben Bernanke, chairman of President Bush's Council of Economic Advisers. But the White House also is looking at other candidates, including former Bush adviser Lawrence Lindsey, said several people familiar with the process. They said the White House hasn't rejected the three main candidates but doesn't want to limit its choice prematurely. There appears to be no clear...

The U.S. economy is heading for a post-stimulus hangover. The double drag from higher oil prices (a tax increase) and higher short-term interest rates is not helping. If we aren't careful, we'll have a recession in 2005. That possibility makes even more dangerous the tax increases being proposed by John Kerry.... Going forward, sustaining growth will require three key steps. Although the leeway for further tax cuts is limited, current tax cuts should be made permanent in order to give households and firms greater confidence about the future tax environment while avoiding additional tax burdens to the substantial drags already...

...While claiming that inflation expectations have eased in the last few months, the Fed Governors believe the U.S. economy has a healthy head of steam, in contrast to bond traders who have been betting that last spring's "soft patch" would persist. Certainly there is ample evidence that the Fed is correctly recognizing the strength of this expansion. Manufacturing output is increasing at a 6.7% annual rate, and we now know that in the second quarter corporate investment overtook cash flow, a key indicator of confidence in the future. This despite the run-up in oil prices that would ordinarily be a...

...Alan Greenspan, the Federal Reserve chairman, has taken very little political heat for raising interest rates in the midst of an unquestioned economic slowdown -- and in front of sensitive national elections -- because the Fed and conventional wisdom blame the slowdown on the recent dramatic increase in energy prices. The crude-oil hike is giving the Fed chairman convenient political cover. But with interest rates so low for so long in this country, consumers have built up an enormous amount of debt. When the Fed made it clear that it would be raising rates on its ascent to interest-rate neutrality...

...Alan Greenspan, the Federal Reserve chairman, has taken very little political heat for raising interest rates in the midst of an unquestioned economic slowdown -- and in front of sensitive national elections -- because the Fed and conventional wisdom blame the slowdown on the recent dramatic increase in energy prices. The crude-oil hike is giving the Fed chairman convenient political cover. But with interest rates so low for so long in this country, consumers have built up an enormous amount of debt. When the Fed made it clear that it would be raising rates on its ascent to interest-rate neutrality...