Wednesday, October 1, 2014
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

Did we learn anything from financial collapses?

stevenson column sig

By
From page B7 | May 11, 2014 |

It was almost 18 years ago that Alan Greenspan, then chairman of the Federal Reserve, uttered his famous warning. Here’s his quote, with two words standing out: “Clearly, low inflation implies less uncertainty about the future . . . but how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions?”

The phrase “irrational exuberance,” although not quite as dramatic as “a date which will live in infamy” – no other expression was – not only shook up the market, but has become permanently associated with Greenspan’s term at the Fed. Looking back at Dec. 5, 1996, the Fed chairman was so highly respected and feared – that it, at least briefly – that it became a self-fulfilling prophecy. The words became mandatory for anyone seeking to comment on the market’s future.

It should be no surprise that it was just a short leap from the market’s nervous reaction to Greenspan’s warning to a rehash of the Crash of 1929. It was hard to avoid media arguments as to whether December 1996 was the beginning of an ominous trend or just a “much-needed” correction. Of course, just the possibility that we were on the verge of a disaster triggered a great deal of selling. Those with cooler heads, so to speak, saw the “Greenspan sell-off” as a buying opportunity.

The fact is, there is very little the two eras – then and now – have in common, with one exception: that it was and is an Alfred E. Newman market. You remember Alfred from Mad magazine, don’t you? The question, “What, me worry?” seems to be rampant on Wall Street, along with the assurance that “things are different now.”

Well, they are different. For one thing, very few of the companies whose stocks had climbed off the charts paid dividends, so there was nothing to fall back on when the panic began. The “hottest” stocks were in three industries – radio, aluminum and aircraft. None of those stocks paid any dividends, so the feeding frenzy was solely based on hope (prayer) for continued price increases.

As the panic on Wall Street began, the Fed decided that the best medicine for an “overheated” economy was higher interest rates. Did the rate increase do the trick? If you think that the failure of 2,000 banks in one week was what the economy needed, then the Fed made a wise move.

Now, of course, Federal Reserve officials are much wiser and are immune from making serious economic mistakes. Yeah, sure. The steady hand on the tiller means that there will never again be a financial collapse. If only.

The lesson that should be learned from financial history is that there are no lessons to be learned, except that we should beware of those who say, “it’s different this time.” Didn’t they say that about the real estate market a few years ago? Or gold? Or the Japanese stock market? The list goes on.

Bud Stevenson, a retired stockbroker, lives in Fairfield. Reach him at Bsteven254@aol.com.

LEAVE A COMMENT

Discussion | 2 comments

The Daily Republic does not necessarily condone the comments here, nor does it review every post. Read our full policy

  • rlw895May 11, 2014 - 6:18 am

    Yes, we learned that markets don't regulate themselves, unless you believe the boom-bust cycle is a form of regulation. If that's the case, I'll amend my statement to "markets don't regulate themselves very well." We also learned that the Republicans are the tool of the small minority of Americans who have learned how to profit from the boom-bust cycles and are willing to do just that, no matter who or how many are harmed. We also learned that people like Elizabeth Warren and Brooksley Born are rare finds to be heeded and put in leadership positions.

    Reply | Report abusive comment
  • just sayin'May 11, 2014 - 10:16 am

    We learned that people are not wise and vote the same tired Tax & Spend ... and Spend ... .and SPEND DemWits into office. The same people will NOT make a difference.

    Reply | Report abusive comment
.

Solano News

 
Middle school students put school candidates on the hot seat

By Susan Winlow | From Page: A1 | Gallery

Pact with union wins Vacaville council OK

By Ryan McCarthy | From Page: A1

 
Suisun City candidates get lively in 2nd council forum

By Ian Thompson | From Page: A1 | Gallery

 
Solano focuses on rail safety

By Barry Eberling | From Page: A3

 
Juveniles hit by vehicle have minor injuries

By Barry Eberling | From Page: A4

 
Booz and Brewz benefit for the Blue Star Moms

By Amy Maginnis-Honey | From Page: A4

Police search for missing man

By Glen Faison | From Page: A4 | Gallery

 
Blessing of the animals slated Sunday

By Amy Maginnis-Honey | From Page: A5

DUI-drivers license checkpoint nets arrests

By Ryan McCarthy | From Page: A5

 
Travis airman killed in motorcycle accident

By Ian Thompson | From Page: A5

Caltrans cancels nighttime Highway 37 closures

By Barry Eberling | From Page: A5

 
Salvation Army gears up for annual Red Kettle campaign

By Amy Maginnis-Honey | From Page: A5 | Gallery

 
Theaters primed for bevy of new movies

By Amy Maginnis-Honey | From Page: A7

Fairfield police log: Sept. 28, 2014

By Glen Faison | From Page: A9, 2 Comments

 
Fairfield police log: Sept. 29, 2014

By Susan Hiland | From Page: A9

Suisun City police log: Sept. 29, 2014

By Susan Hiland | From Page: A9

 
Fairfield police log: Sept. 27, 2014

By Glen Faison | From Page: A9, 2 Comments

Suisun City police log: Sept. 28, 2014

By Glen Faison | From Page: A9

 
Suisun City police log: Sept. 27, 2014

By Glen Faison | From Page: A9

American Legion seeks Korean War veterans for award

By Susan Hiland | From Page: A10

 
Third Annual Ride to Defeat Diabetes is Sunday

By Susan Hiland | From Page: A10

4-H Achievement Night honors county members

By Susan Winlow | From Page: A10

 
Measure A committee plans weekend precinct walk

By Susan Winlow | From Page: A10

$26,227 payment to maintenance man challenged

By Ryan McCarthy | From Page: A10

 
FBI announces reward for Vacaville bank robber

By Jess Sullivan | From Page: A10

.

US / World

Forest areas reopen after huge fire

By The Associated Press | From Page: A6

 
Hong Kong leader refuses to meet with protesters

By The Associated Press | From Page: B7

Secret Service chief on hot seat for WH breach

By The Associated Press | From Page: B7

 
Afghan pact signed amid questions on Iraq pullout

By The Associated Press | From Page: B7

Luck, instinct determined fates of volcano hikers

By The Associated Press | From Page: A9

 
Government confirms first case of Ebola in US

By The Associated Press | From Page: A9

Mayor of suburban Los Angeles city killed

By The Associated Press | From Page: A9

 
Crash, suspicious device lead to 101 closure in LA

By The Associated Press | From Page: A9

Gov. Brown governor vetoes ethics bills

By The Associated Press | From Page: A9

 
Police on manhunt find pipe bombs in woods

By The Associated Press | From Page: A9

Oklahoma man charged with murder in beheading

By The Associated Press | From Page: A9

 
California becomes first state to ban plastic bags

By The Associated Press | From Page: A11

Bay Area looks to expand overnight transit options

By The Associated Press | From Page: A12

 
Gov. Jerry Brown signs California gun restriction

By The Associated Press | From Page: A12, 1 Comment

.

Living

Community Calendar: Oct. 1, 2014

By Susan Hiland | From Page: A2

 
Today in History: Oct. 1, 2014

By The Associated Press | From Page: A2

 
Horoscopes: Oct. 1, 2014

By Holiday Mathis | From Page: B5

A speedy, kitchen sink approach to pumpkin bread

By J.M. Hirsch | From Page: B6

 
The flavor of fall – pumpkin pie in a cinnamon bun

By The Associated Press | From Page: B6

One simple slicing trick to bake a beautiful tart

By Sara Moulton | From Page: B6

 
.

Entertainment

TVGrid

By Daily Republic Syndicated Content | From Page: A5

 
Morgan: ‘Can’t believe’ Walmart blaming him

By The Associated Press | From Page: A7

.

Sports

Royals beat A’s 9-8 in 12 in AL wild-card thriller

By The Associated Press | From Page: B1 | Gallery

 
Local report: Rodriguez volleyball team downs Armijo

By Daily Republic staff | From Page: B1

Pirates’ Volquez looks to continue revival against Giants

By The Associated Press | From Page: B1 | Gallery

 
Raiders make Tony Sparano interim coach after firing Allen

By The Associated Press | From Page: B1

 
NC State coach apologizes for fake injury remarks

By The Associated Press | From Page: B2

NFL says Abdullah should not have been penalized

By The Associated Press | From Page: B2

 
NFL has laundry list of verboten celebrations

By The Associated Press | From Page: B2

Government: NFL TV ‘blackout’ rule unsportsmanlike

By The Associated Press | From Page: B2

 
Olympian Michael Phelps apologizes for DUI arrest

By The Associated Press | From Page: B2

Gravely injured Giants fan sues Dodgers again

By The Associated Press | From Page: B2

 
Ex 49ers RB James agrees to terms with Dolphins

By The Associated Press | From Page: B2

 
FCC will consider petition to ban ‘Redskins’

By The Associated Press | From Page: B2

Training camp essential for NBA’s new head coaches like Warriors’ Kerr

By The Associated Press | From Page: B2 | Gallery

 
No. 14 Stanford trying to jolt stagnant offense

By The Associated Press | From Page: B2

49ers’ Wilhoite filling the injury void at linebacker

By The Associated Press | From Page: B8 | Gallery

 
.

Business

Could a merger follow the PayPal-eBay split?

By The Associated Press | From Page: A9

 
EU says Apple gets illegal tax benefits in Ireland

By The Associated Press | From Page: A9

.

Obituaries

John ‘Bo’ M. Miller

By Nancy Green | From Page: A4

 
David Earl Butenhoff-Forristall

By Nancy Green | From Page: A4

Marte Abad Lubag

By Nancy Green | From Page: A4

 
Clara May Clift Triplett

By Daily Republic staff | From Page: A4, 2 Comments

.

Comics

Baby Blues

By Daily Republic Syndicated Content | From Page: B4

 
For Better or Worse

By Daily Republic Syndicated Content | From Page: B4

Baldo

By Daily Republic Syndicated Content | From Page: B4

 
Zits

By Daily Republic Syndicated Content | From Page: B4

Wizard of Id

By Daily Republic Syndicated Content | From Page: B4

 
Dilbert

By Daily Republic Syndicated Content | From Page: B4

Beetle Bailey

By Daily Republic Syndicated Content | From Page: B4

 
Rose is Rose

By Daily Republic Syndicated Content | From Page: B4

Frank and Ernest

By Daily Republic Syndicated Content | From Page: B4

 
Sally Forth

By Daily Republic Syndicated Content | From Page: B4

Peanuts

By Daily Republic Syndicated Content | From Page: B4

 
Blondie

By Daily Republic Syndicated Content | From Page: B4

B.C.

By Daily Republic Syndicated Content | From Page: B4

 
Pickles

By Daily Republic Syndicated Content | From Page: B4

Garfield

By Daily Republic Syndicated Content | From Page: B4

 
Get Fuzzy

By Daily Republic Syndicated Content | From Page: B4

Crossword

By Daily Republic Syndicated Content | From Page: B5

 
Cryptoquote

By Daily Republic Syndicated Content | From Page: B5

Sudoku

By Daily Republic Syndicated Content | From Page: B5

 
Bridge

By Daily Republic Syndicated Content | From Page: B5

.

Breast Cancer Awareness 2014

Breast cancer in younger women

By Green Shoot Media | From Page: BCA2

Talking with your doctor

By Green Shoot Media | From Page: BCA3

Breast cancer myths

By Green Shoot Media | From Page: BCA4

Diet linked to cancer

By Green Shoot Media | From Page: BCA9

Giving emotional support

By Green Shoot Media | From Page: BCA10

After the treatment

By Green Shoot Media | From Page: BCA12

Join the fight: Get involved

By Green Shoot Media | From Page: BCA15