Alan said:
> I came across a quote at
> http://www.federalreserve.gov/boarddocs/speeches/2003/20030829/default.htm
> that I think, with a little adaptation, can apply very well to beekeeping:
Funny you should mention that particular quote.
The quote is the start of the giant flushing sound of the worldwide
economy continuing to go down the drain, at least until 2004.
With wages stagnant and growing unemployment, honey sales at retail
will certainly go down, both in price and volume.
Honey is an "optional" purchase.
Like everyone using the term "paradigm", Alan Greenspan was trying
to avoid stating the plain and simple truth. The speech was a
desperate attempt to make excuses and retain some tiny shred of
his former credibility. I, for one, will no longer trust anything
Greenspan says any further than I could comfortably spit a rat.
The short story is that he LIED this spring. That's unheard of
in the history of the Fed. I might as well now put my money
into Argentinean oil futures as US Treasury notes. :)
The "risk factor" mentioned was the Fed ITSELF.
The "probabilities" were the likelihood that the Fed would
IN THE FUTURE overtly mislead the investment community.
What does this have to do with beekeeping? Stick with me,
Greenspan put YOUR money where his mouth was, and then said
"just kidding". I don't care which flag you fly, Greenspan
and the Fed hurt the whole planet, which insures not only
continued depressed honey prices, but also lower demand,
even at lower prices than we have now.
This might strike some as "off-topic" for this list. If so,
go ahead and hit delete, but I think beekeepers need to pay
attention to "money", as we are all affected by both the
worldwide market for honey, and the planet's economy.
In May, the short-term interest rate was 1.25%. Greenspan spoke
about an "unwelcome substantial fall in inflation", and mentioned
implementing "unconventional policy", meaning actions other
than tweaking interest rates. This made sense, since when the
interest rate is down around 1%, you can't get much impact from
cutting interest rates to "get the economy going".
"Unconventional" means "buy backs" of long-term Treasury notes in
an attempt to CREATE some "inflation". The idea is to avoid the
specter of "deflation" by paying attention to LONGER TERM rates
rather than the short-term rates. Other Fed officials echoed this
thinking in press interviews. (While setting a "goal" for more
inflation may sound weird, England, Europe, Mexico, New Zealand,
and a bunch of other central banks do this often.)
So, if money were honey, the Fed would been the biggest beekeeper on
the planet saying that he was going to BUY UP and stockpile honey,
rather than simply adjusting his asking price for honey.
What happened? Well, I trade bonds, and I knew:
a) The Fed only had only 1% left to cut on the short-term rate
b) If the Fed bought up a serious chunk of long-term notes, this would
reduce (or eliminate!) downside risk on longer-term Treasury bonds.
c) If they made a short term rate cut of about 0.5% and bought up
long-term notes, this would be a reasonable move, and would
have a positive impact on the planet's economy.
So, everyone and his sock puppet bought (more) long-term notes.
On June 3, Greenspan told a Berlin conference that what was needed
was a "fire break" between the U.S. economy and deflation. Clearly,
this meant that the Fed was concerned that even a cut from 1.25% to
0.25% on the short-term rate would not be enough.
So, everyone and his brother-in-law bought even MORE long-term notes,
expecting both a serious cut in the short term rate and a bond buy-back.
People who had NEVER traded bonds before starting "getting in".
Then, on June 25, the Fed cut interest rates, but only by 0.25%.
My models (why do you THINK we call it the "Supercollider"?) told
me that I should dump about 35% of my long-term notes RIGHT AWAY.
If the Fed cut the short term rate by only a lousy 0.25%, this meant
that the planned "firewall" had been reduced to a mere "coat of paint",
and that the Fed was NOT going to do anything more. Lots of other
people did not notice that the Feds actions did not match their words.
On July 15, Greenspan dropped the other shoe, telling Congress that
"situations requiring special policy actions (like buy-backs of bonds)
are most unlikely to arise."
The lynch mob starting forming almost at once. They got CONNED by
ALAN GREENSPAN, of all people! He and his cronies created a
"bubble" in the long-term bond markets, of all things. That's kinda
unprecedented. Its not what bonds are for. People who invest in
long-term bonds are risk-averse by nature.
People started dumping long-term bonds en masse, the opposite of
what the Fed wanted. People who might have held their bonds if
not for the lies starting dumping bonds. Rates went down further.
How did all this hurt you? Well, were did all that money that
went into long-term bonds come from? From other investments!
Rather than getting more money into circulation and investments,
money went into long-term bonds, and is now thrashing around
looking for "safe havens", creating more instability than there
was before. Gee, thanks Alan! Guess what is NOT a "safe haven"
any more as a result?
So, now one sees headlines like this one:
"Don't read too much into our speeches, Fed officials tell bankers"
http://news.independent.co.uk/business/news/story.jsp?story=439046
When you have to start IGNORING what the Chairman of the US
Federal Reserve says in public, a "prudent long-term investment"
is quickly re-defined by the smart money as "burying coffee cans
full of cash in the back yard".
A better way to get an actual recovery going might be to bury
Alan Greenspan in the back yard.
jim (Who suffers from "Deficit Attention Disorder")
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