and Destructive Creation
speech gave few clues, perhaps because Big Al doesn’t possess any
himself these days.
of new ideas, he had the gall to warm over the hot enchillada that
was his Boca Raton speech from last October, the High-Tech encomium
that served to light the blue touchpaper on the sky rocket of Y2k
liquidity, which gave the market its final weeks of glory. He even
went back to his mid-90s musings on job insecurity in the tightest
labour market on record! And we thought the only doubt the American
working man had these days was whether to turn up and drive his
truck for FedEx, or sit at home and trade its stock instead!
is worrying that Nestor, despite much self-contradiction, still
clings to the same old productivity myths with which we have dealt
before, but it is perhaps more damaging that a universe of financial
analysts still confuses output-per-hour with added-value-per-hour
and so thinks that simply making more units guarantees higher profits
and thus justifies higher stock prices.
more upbeat times, this latest offering would have sparked another
surge in the Nasdaq since, though laced with just enough warnings
of higher short-term interest rates ahead (we nearly said more restraint,
but the Chairman and the market still confuse dearer credit with
less abundant credit), it was also replete with soothing noises.
was, for example, ‘little doubt’ that productivity had risen , nay,
had accelerated and there was ‘scant evidence’ that this was about
to ‘crest’. Moreover, the Chairman saw ‘no reason’ that this growth
could not ‘remain elevated, or even increase further’, bringing
Milk and Honey to all.
but also counter-productively, he went on to espouse both the equity
market’s inviolability and also its invulnerability. Even if targeting
assets were appropriate (and why exactly are the prices of financial
claims on goods less suitable for interference than those of the
goods themselves, by the way?), he doubted whether he could affect
them even by raising rates in bigger increments. (He could always
try, it worked for Paul Volcker after all!) . Such uncharacteristic
modesty from our Chairman. Patently, he still feels the chagrin
of being ignored by the Bulls through all his earlier years of doubt.
with his usual incantation about ‘significant unbundling of risk’
(recurrent financial crises, derivatives disasters, surging default
rates), he moved on to the wonders of the modern economy in pouring
endless credit into Dot.Com malinvestments on a monumental scale.
Or, rather as he termed it, the process of ‘creative destruction’
in shifting ‘capital’ from ‘failing technologies’ into those at
the ‘cutting edge’.
day Jeff Bezos makes as much clear, indisputable profit in his whole
cyber empire as Sam Walton makes in just one of his stores, we might
begin to give this one some credence. Until then this is mindless
bally-hoo, more suited to a press release from an IPO lead manager
than a text from the guardian of monetary stability.
decidely Old Airing of the New Era, the speech showed that Greenspan
remains as clearly wedded to the glamour of Tech as any Nethead
daytrader and this, in turn, means he has no clear policy prescription
Schumpeter and ‘creative destruction’, harken instead to the Trumpeter
of Destructive Creation.
April 12, 2000
Sean Corrigan writes from London on the financial markets, and
edits the daily Capital Letter and the Website Capital