Easy does it, says the Chairman
Greenspan delivered his usual carefully worded testimony before the Joint Economic Committee, last week. Whatever the nuances and interpretations of his various statements, one thing was clear. The Fed is in no hurry to raise interest rates. But this is hardly a surprise. They are not going to reverse a successful policy while there is residual uncertainty about the strength of aggregate demand. Low rates have kept the household sector afloat via the wealth effect generated by higher house prices. Not least, through refinancing, it has allowed homeowners to boost their spending power.
Quite a few observers have noted the steady rise in house prices over a time period when stock market indices have been going south. Greenspan, of course, strongly denied that we are witnessing a housing bubble, which should immediately raise a few doubts among those with a suspicious turn of mind. The reality is that asset classes, real or financial, are not
